The answer is unequivocally yes. With the interest from your mortgage being most people’s biggest tax deduction the common thought is to keep your mortgage for the tax deduction. True the tax deduction is nice and while you have to have a mortgage, deduct every cent you can. The real question is this “Is paying the bank interest every month worth saving a percentage of that on taxes?” The answer is NO! The savings on taxes is not worth it. You pay the bank 12K to save 3k on taxes, not good math.
“I could invest the money and make more in the market, instead of paying off the house.” A good point, but consider the recent risk of the market. A paid off mortgage doesn’t come back, a zero balance is a zero balance. If your money in the market drops like the Titanic, it may never come back. With out a house payment you can quickly build up an investment account by putting in your old monthly payment.
A paid for house is one of the ultimate forms of security. Approximately 30% of homeowners own their homes free and clear. Remeber your house is a liability not a true asset until you sell. As long as you have to make payments on it you are liable for it and it is a money drainer not cash flow gainer. In the long term your personal home is an asset, however the wealth is only realized when you sell it.
Tips for paying off your house early:
1. Get out of consumer debt first and set aside a 6 to 9 month emergency fund before tackling the house.
2. Make sure you are investing for retirement first.
3. Make atleast one extra principal payment a year. This could save 8 years on a 30 year mortgage. Make sure the extra payment is labeled principal other wise the bank may apply the payment to interest as well.
4. Once you are out of other debt and investing, take some of those old payments and add them to the house payment.
5. Stay in the house long enough to pay it off. Typically a house will get paid off over a long period of time. This means you either stay in the house a long time or when you move, the new mortgage you get is about the same as the balance you just left (means putting down more on the bigger house).
6. Live below your means. If you can afford a $300,000 house, live in a $200,000 house. That pains me to say as a Realtor, but it’s the truth. The best home is the one your happy and comfortable in.
7. Imagine what life will be like without the payment. At 31 I dream of no house payment and look forward to the day I can save that money. It’s been great experiencing no car payment. No house payment will be awesome.
In our age of fast paced living paying off a house seems like an impossible task. It’s a slow and steady process. The result is amazing. Do some research on the topic. You have the means, I encourage you to work towards the end …. of your mortgage.
Joseph Cortez 