If you could pay off your house would you??

[AKcharger]

I was thinking about workin' to pay off our house here in Fl, but then I thought If I just kept or invested the money instead of paying off the house I'm getting a pretty sizable loan for only 4%.

What do you guys think...

[Aero426]

Not knowing your situation, I don't think there is any one right answer.    Getting your money at 4% is tough to beat.    If you are early in the game and plan to stay long term, if I could kick in extra per month towards principal and effectively shorten a 30 year to a twenty, or a 15 to a ten, sure, I'd do it.   

In my situation, I am down to the last couple years of a ten year.  So my principal payment is increasing dramatically by itself.   Even at my "higher" 5% interest rate, because of a relatively small amount owed, I don't see a reason to make extra payments this late.

[green69rt]

Like areo426 said "it depends"   You kind of have to do some figuring and also take into account where the "payoff" money is coming from.  If it wipes out your liquid savings then probably a bad idea, but if it's money setting around in some kind of MM account drawing 0.02% then yes.  Getting 4% fixed return on money in today's market is a prize!

One thing that does change is that there's nothing like owning you house free and clear.  It just feels good.

One item, here in Texas I have heard that you should take your deed to the county court house, or wherever, and have the deed reissued with no lean notations on it.  I don't now why, something to do with old mortgage companies getting their paperwork screwed up and coming back to you saying you still own them money.   My last mortgage was sold at least 5 times before I got it paid off so there are 5 companies that could screw things up.

[Daytona R/T SE]

I did it last year. 

Do it and never look back. 

[NHCharger]

When I built my house in 99 my goal was to build it mortgage free, missed by 30k 
Did pay it off a few years later. As mentioned it feels good to be mortgage free. Allows you to spend money on other things. One thing I don't do is piss money away on vacations.
Of course I pay over 10k a year in property taxes 

[twodko]

Like the skivvies it Depends on many factors.

I have a 4% loan and its a great rate to have
BUT if you the mortgage interest tax write off
it might not be prudent to payoff ones hone.

[dyslexic teddybear]

Mortgage free from 08......lost the house to fire, so the insurance paid off the small amount left. I rebuilt, doing most of the work myself. It's livable, and I am finishing it as my wallet permits.

I LOVE no payments. JMO....never again. Ever.  

For me, no way any deduction would be worth aggravating my payment allergy. Others may have a different situation.

[ITSA426]

Having money to invest, play with, or save, is better than being able to deduct a portion of it.  If you pay the house off you can apply the payment money toward any other debt.  Living debt free is best for peace of mind and overall security.  But as has been said every situation is different.  I paid the house off 20 years ago.

[Lord Warlock]

The sooner the house is paid off, the sooner you can think of being debt free, or able to buy one or two of those toys you've been putting off.  There are always considerations however that could change your position.  If you need the deductions to offset income, can understand why the extra interest helps.  It is smarter to pay off anything at a higher rate first, but there is also a draw to get rid of the big albatross once and for all.  I've been refusing to refi the house again because it is the best asset we have, and only owe about 7 years left on it, and even at the 5.25 rate we have, the draw to pay it off quicker is always present, but the rate isn't bad overall, its nothing compared to what we paid on our first house in 85, 13.89% when other loans were at 16% for mortgages back then.

If you were getting down to the 5 year mark, I'd seriously consider it, you still have to put aside property taxes each year for it, but it is invariably cheap to live once you can stop paying rent/mortgage.

[XH29N0G]

I approached it like the others have said by looking into it as an investment at XX% and then comparing with options.  I paid mine off shortly before the market went south so I had my money in something that was saving me 5% rather than being flat.   Not having the stress of knowing it will need to be paid regardless of circumstance also has its benefits.   

[AKcharger]

Thanks guys, good points. My situation is after the move to Florida last year everything is going great so we're going to sell our home in Alaska this summer. IF all goes well we SHOULD walk away with enough to pay off the Florida house. We don't have any debt (drive old cars, live normal) and I've always planned to pay-off the house ASAP but since this is truly a once-in-a -lifetime deal, I got thinking about investing instead.

There's always other angles to things and I always come here for life advice!! 

...One item, here in Texas I have heard that you should take your deed to the county court house, or wherever, and have the deed reissued with no lean notations on it.  I don't now why, something to do with old mortgage companies getting their paperwork screwed up and coming back to you saying you still own them money...

Hmmmm interesting 

[green69rt]

Just one point about the deduction for mortgage interest.   The standard deduction is pretty high now so you really need a lot of deductions to make it worthwhile.    Usually what happens is that as you get close to paying off the house the amount of interest (deductible) drops of dramatically so you end up paying 4% interest and not getting any additional tax benefit.   4% of $30,000 is $1200 and that's not even close to the standard deduction, of course there are other deductions you need to consider.

[Steve P.]

OR ~~~~ you could pay off MY HOUSE!!!!   

[draftingmonkey]

You have received some good advice and I'll throw in a couple of thoughts.

Will the investment income have a higher return than the interest you are paying on your mortgage?  If your investment return is smaller than the interest on your mortgage you are losing money.

Since you are planning to retire does this investment have a guaranteed return and if not can you afford to lose the money if your investment opportunity fails or loses value?  Opened a brokerage account 15+ years back and when the crash came lost a lot of the value.  So here I am after all that time and the account is only about 15% above what it originally opened at.  As my pappy always told me nothing is guaranteed in life.

We payed off our house in '12 due to the fact that investment return was so bad.

[John_Kunkel]

Forget all the other issues, pay it off so you have the security of a roof over your head if the SHTF.

[AKcharger]

OK, more sage advice...
- Didn't think about interest vs. std deduction
- Mutual funds or 401K that I would put $$ into aren't spectacular so would it go above 4%   

OR ~~~~ you could pay off MY HOUSE!!!!   

I'd be happy to! just send me you'll full name, address, Social Security# Bank routing number and mother's maiden name and I'll get right on it!   

[Steve P.]

Hahahahahahahaaaa....   

[69rtse4spd]

Another thought, if you need the tax break, could you put the money in a checking account that takes the payment out each month. My best friends brother won two million on a scratch off game. Gets paid once a year, money set up like this. The bank takes out the house payment & insurance all at once.   

[ws23rt]

I was paying off my mortgage at an accelerated rate (extra 1k per month) in the nineties because of the interest rate 12%.  I also was making more money per month than I needed to live on.
Like others have said you need to pencil out where the best use of your earnings should go. That means taking into account the current market for the dollar.

Their is a lot of value in knowing the house is paid for.   That alone is worth missing out on a few bucks that can be gleaned by hanging on to the mortgage longer.
My mortgage has been paid off now for nearly ten years and I got over the interest subtraction that used to make me smile at tax time.
Now what I see is an increase in the properties value that translates to higher property ---TAXES--

So now my home (investment) is an expense (beyond insurance and maintenance)and cost me a large amount every month for the privilege of owning it. It's like paying rent to live in my own home that is bought and paid for. I now am paying nearly the same amount in taxes that my original mortgage payment was.

One sure thing about working and planning for the future is the tax factor needs to be accounted for.  If you have money and stuff it will be tapped into---taken from you---because you have some.--oops a bit of a rant--

[RECHRGD]

I was paying off my mortgage at an accelerated rate (extra 1k per month) in the nineties because of the interest rate 12%.  I also was making more money per month than I needed to live on.
Like others have said you need to pencil out where the best use of your earnings should go. That means taking into account the current market for the dollar.

Their is a lot of value in knowing the house is paid for.   That alone is worth missing out on a few bucks that can be gleaned by hanging on to the mortgage longer.
My mortgage has been paid off now for nearly ten years and I got over the interest subtraction that used to make me smile at tax time.
Now what I see is an increase in the properties value that translates to higher property ---TAXES--

So now my home (investment) is an expense (beyond insurance and maintenance)and cost me a large amount every month for the privilege of owning it. It's like paying rent to live in my own home that is bought and paid for. I now am paying nearly the same amount in taxes that my original mortgage payment was.

One sure thing about working and planning for the future is the tax factor needs to be accounted for.  If you have money and stuff it will be tapped into---taken from you---because you have some.--oops a bit of a rant--

I agree completely!!  Although I retired in '07 and carry no debt, my income gets eaten into by the, never ending inflation.  The taxes and utility rates always rise and I've taken that into account by not taking all the income I could from investments and letting them grow.  There is talk now of the possibility of a future "wealth tax" where they will start to go after your net worth.  In other words, if you've done every thing right and gotten to a place where you can retire off of your own investments, they want a piece of that too, not just taxing the income derived.   back on topic....  Pay off the house!!  Unless I misunderstand the original post, he's taking out a big loan and wants to invest it or pay off the house with it. If that's really the case and he pays off the house with it, that is only trading one loan for another.  If the money is used for investment purposes, then that puts the borrowed money at risk.  Not a good thing.......

[Todd Wilson]

Forget all the other issues, pay it off so you have the security of a roof over your head if the SHTF.

YUP! I agree!   You cant be hurt too bad if you own your house! Unless you don't pay your taxes!


Todd

[Green71R/T]

Having your house paid for also gives you a little more freedom.  As my mechanic friend says,"No I won't work on your Ford. My house is paid for."

[AKcharger]

 

[ACUDANUT]

According to my CPA, Pay it off. The rewards are not worth the little you get back from the FEDS.  Peace of mind knowing you own it too, would be awesome.

[ws23rt]

According to my CPA, Pay it off. The rewards are not worth the little you get back from the FEDS.  Peace of mind knowing you own it too, would be awesome.

I agree.   That also goes for any debt that can't be zeroed out at the end of the month. The option of not paying off debt is to spend money in order to continue to owe.