Should You Pay Off Your Mortgage Our Use It For A Tax Deduction?
February 14th, 2006 by ert
If you listen to financial experts, this is one issue that will give you conflicting advice. Should you pay off your principal residence or does it make more sense to keep it for the tax deduction?
To use the mortgage interest deduction on your taxes, it has to make sense to itemize. Since it doesn’t in your case, the effective interest rate on your mortgage isn’t adjusted to include the deduction. For illustrative purposes, let’s say that the interest rate on your mortgage is 6 percent. If you don’t expect to earn more than 6 percent after tax on your investments, and there’s no prepayment penalty on the loan, it can make sense to prepay the mortgage.
Think through this decision. It’s not one we can make for you. Because it depends on your personal financial situation, you have to examine all the options.
If you’ve got a reason to itemize, it can make great financial sense to keep your mortgage.
Relevant Tags: eliminate debt, pay off debt, personal finance, small paymentsPosted on Tuesday, February 14th, 2006 at 7:52 am In Debt Elimination