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Does Paying Off Your Mortgage Make Sense?

I am always surprised when someone is seriously vacillating over whether to get out of mortgage debt or not.  I always hear the argument that a mortgage is a good tax write-off and can save the average couple in the 28 percent tax bracket, with a $200,000 loan at 5 percent, for example, $2,781 in taxes the first year of a loan.  That’s nice, but how much will they pay in interest expense that first year? Around $14,000, so essentially that’s like paying $1 to get 20 cents in return.  Plus your tax savings decline the further you get into a loan. Staying in debt for the life of a 30-year mortgage doesn’t make sense at all! Let me reiterate: Mortgage debt for a home in which you live and cannot get the equity out of unless you move is bad debt…get Don'tWaitout of it now!  With all the interest expense you could save and put to better use elsewhere it makes no sense to stay in debt just to try and save a few tax dollars.  In today’s economy however, there are some things you may want to consider when paying down mortgage debt:
1. If you have consumer debt, such as a credit card, you should probably concentrate on paying that off first.  Although this isn’t a hard and fast rule either, since without putting all your debt into a forecasting software and seeing how quickly you can pay it off depending on how it is ranked can change which debts you concentrate on first.  Usually short-term debt like credit cards come first, while long-term debt like a mortgage is lower on the list.  The only way to know is to run the numbers.  Go here to learn how you can gain access to a debt forecasting software to run your own Get Out of Debt reports and see what you should be working on.
2. While paying down debt, you should also be working to build up emergency savings AT THE SAME TIME.  If you are pouring so much into paying off your mortgage that you don’t have liquid savings in case of trouble, you should probably back off until you do.
Finally, just a quick comment on advice given in the popular media right now, like something I recently read on CNN Money News about alternative ways to use your money as opposed to using it to pay off your house.  Such media often suggest that putting money into stocks and bonds is more likely to give a higher return over the long-run than it would paying off a home loan, given today’s low rates.  It’s a nice thought, but consider the volatility of the market, which makes putting money here a big risk.  Yes, real estate values fluctuate and have been low in recent years but land investment tends always to be safer than stock market investment.  Secondly, unless whatever you can earn on the stock market over time is more than you would pay in interest expense on your home, it doesn’t make sense to play the market as long as you’re in debt, and yes, that’s any kind of debt, including a mortgage.  If you need a good example, just look at the nation’s self-made millionaires.  They all own the home they reside in free and clear.  You’d be hard-pressed to find any wealthy American with a mortgage hanging over their head.
If you study the nation’s wealthy population, the question about whether paying off your mortgage or not pretty much answers itself.

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