| Mortgage prepayments ... put into savings instead? |
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antgoodlife
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| Mortgage prepayments ... put into savings instead? |
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I'm purchasing a house 30 year mortgage, 5.875 interest rate no points. Just about ready to close. I am very interested in prepaying it as if it was a 15 year loan, (understood i could have probably gotten a slightly better rate if I did that from the start but I don't want to be locked into the payments). My questions are as follows.
Are extra payments tax deductible?
If not, I get 5% in online savings accounts and am wondering if I should make my payments into it (until i reach the payoff amount) or would I be better off putting it towards my mortgage as if it was a 15 year loan? Too much math here to figure it out with a calculator I think unless someone can point me at one that would figure all this out.
Thanks in advance, and please let me know what if any more information you need. Thank you.
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Wed Jan 17, 2007 2:05 am |
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JCook
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No, extra payments are not tax deductible. You are paying off the principle with extra payments.
Mathematically speaking you are better off paying off the 5.875 % interest than making 5% interest, but in life there is more than just math.
It is great to pay off your mortgage as soon as you can but it is also not wise to pay off your house and have absolutely nothing saved at all. You need a balance between savings and paying off your house.
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Wed Jan 17, 2007 3:11 am |
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oldguy
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For each $100,000, your payment is $592. For 15 years it would be $837. If you put the extra $245/m into an SP500 Index Fund, it should be about $124,000 in 15 years (and you would owe $70,663). You could pay off the house from the $124k and have $53,000 left over. Better yet, keep the loan for 30 years, you should have about $860,000 in the SP500 Index and your house would be paid for. In any case, it is nearly always bad business to prepay a home mortgage - that loan can be very valuable to you. (Tip: Put the $245/m into a Roth IRA, then the $860,000 will be tax-free).
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Wed Jan 17, 2007 5:12 pm |
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Airborne
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| NASD warns members on using home equity money |
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NASD's warning may not necesarily apply in your case since this is a new home purchase, but the message should still be clear
I highly recommend Missed Fortune 101. In your case, an equity indexed UL would be more appropriate, since there is NO DOWNSIDE risk, along with a principal guarantee.
Good info. in the abovelisted book on why it's actually not wise to pay off your mortgage quickly.
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Wed Jan 17, 2007 9:53 pm |
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Bid-Palace
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Interesting..
What If you Hold As A Primary Home Owner For at Least Two Years (Improve, Develop, etc During That Period) and let the Value Appreciate Hopefully and Sell Tax Free up to 250k (Single) or 500k (Married Couple).. Then you only spend 2 yrs interest, Or If you are Willing to Hold then you Can Live there as Primary Resident For 2 Years and Rent Out for 1,2+ Yrs. There were be different Tax Implications then but It is Interesting of the various ways to benefit with Real Estate.
The Benefits of putting $ away into an interest Earning Account in the long run are great. It's not Hard to get 5% these days in a Stable Money Market.. Paypal Business has been about that Rate For A while.
Ok, Wish everyone well and thanks for the input.
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Sun Feb 04, 2007 6:03 am |
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MidshoreMoney.com
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Always negotiate surplus payments into your mortgage contract.
Some places won't allow you to pay off your mortgage faster.
Also, make your payments by-weekly instead of monthly. Why? Because at the end of the year, because of the way the weeks work, you made 13 months worth of payments without it actually affecting anything.
Pat
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Sun Feb 11, 2007 4:54 pm |
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