3.0 for 15 year mortgage

[Dakota]

Paying off a mortgage early is dumb. Anyone with an ounce of economic or financial training will tell you that. Those that advocate shorter term mortgages or early playoffs simply do not understand very basic principals of money.

That is where many in America are brainwashed.

Unless you have a big mortgage, you are not getting much of a tax benefit from it. In fact, congress is considering getting rid of the mortgage deduction and if it is off the table now, I wouldn't count on it being off the table in the future. I do believe it is going to eventually happen or be seriously limited which will single out those with high mortgage balances (those who benefit the most).

Check your numbers in this calculator.

How Deductible is your mortgage interest?

For us, we save about $2,000 per year in taxes by itemizing our deductions. Let me take blazen as an example, his P&I is about $1045 per month or @12,500 per year. Without a mortgage payment, he has a extra $12,500 per year in income minus his tax burden (we'll use my savings for this example) so he actually gave himself a raise of $10,500 per year. That is when you invest that income into a 401K or deferred comp program.

Paying your mortgage off is a smart move. Don't be a brainwashed zombie tommy. Truthfully, I blame this sort of teaching the reason our country is as messed up as it is. Americans think having a house is a form of wealth and in reality, it isn't.

 

[blazinlow89]

Did you figure out my password??? Lol guess it is easy to figure out with the interest rate, loan amount etc. I think you may be within a few dollars on the exact amount. I also have a high insurance premium (about $700 a year), but I am covered for anything and the only thing that would screw me is wind storm deductible.

Sad part of all of it is my mortgage for just P&I is less than what I was paying for rent for a 1 bedroom apartment. Money wasted.

 

[ProfMoneyWise]

Renting is buying shelter.

Personal experience has shown an average of 1% - 3% of my homes value on a yearly basis is spent on basic upkeep for minor things that break, need gas, paint, fertilizer, and other non-emergency type expenses. I have found this category(ies) is where the money that some think they save by owning rather than renting resides.

A home purchase should be viewed as a 5 year or more proposition. If there is a chance the buyer will move in 5 years or less renting is my advice. I also advise to buy a home the buyer must be:

Debt-free

Have a fully funded emergency fund of 6 months expenses in a separate safe savings account (not invested)

Have at least 20% down to avoid PMI.

Take on no more than a 15yr fixed mortgage if one is needed at all and do not let the total PITI+HOA be more than 25% of the buyers take-home pay.

Do not buy as an investment buy it to live in it. If you make money on it someday great but like where you live.

Use the 25% rule as your guide. Stay at/below that figure and you have the means to actually enjoy life a bit.

There is no shame in renting but there sure is shame in foreclosure and if you are living in a home you cannot fathom ever owning in full you are living in to much home.

If after paying off your home you miss the "I'll send in $10K to the bank to avoid sending in $2500 to the IRS" trick send the $10K to your Church. Same deduction applies (at the moment anyway).

Make sure you have the 1% - 3% of homes value at the ready. It costs money to live in them. Even the paid-for one's

 

[Dakota]

I am going to bump this thread since we were just chatting about this....

Home mortgage interest deduction may fall off the fiscal cliff » OC Housing News

 

[Rommey]

Paying off a mortgage early is dumb. Anyone with an ounce of economic or financial training will tell you that. Those that advocate shorter term mortgages or early playoffs simply do not understand very basic principals of money.

Yeah its a real pain in the ass to paying off a 30-year mortgage in 18 years.

Let's see. my P+I was $1206/month. 360 months for the term of the mortgage. That's $434,160 total P+I. The principal was $170K. I can assure you I didn't pay anywhere near $260K in interest.

Let's say that you pay $15,000 in interest in a year. The standard deduction is $11,900. That's a delta of $3,100. The tax on that $3,100 is as low as $465 (@15% rate) or as much as $1,085 (@35% rate). Explain how paying $15,000 to a bank to get a ~$1,000 deduction on your taxes is better than having $15,000 in your bank account.

In my case, NOT having to pay a mortgage has allowed me to pay off almost all my credit cards (saving me interest), payoff my wife's car in less than a year (saving me interest), save for future house/car/vacation etc. (earning interest, however little it is), and invest money in stocks. Additionally, it allowed my wife to maximize her investment in her 403b retirement account.

Yeah, it sure is dumb to not be paying a mortgage anymore. I guess I'm glad I don't have "an ounce of economic or financial training".

 

[Wenchy]

Don't pay a fee to do what you can do yourself.

Divide your payment by 12 and send in that amount as extra principal each month or just save up 1/12th each month and send that in once a year.

It equates to approximately 8 years of a reduction on a 30 year mortgage.

Look into a 15yr fixed and do a re-buy at a very low rate. You may find the cost to do so to you per month as far as a payment goes may be very doable and close to the same amount you are looking at with adding the 1/12th payment.

Good thinking either way. Owning where you eat and sleep is liberating.

Yeah.

Until the government wants the same amount in property tax of the original mortgage.

 

[kwillia]

Yeah.

Until the government wants the same amount in property tax of the original mortgage.

Too true. We don't every own land and/or houses in America... we just rent them from the government.

 

[ProfMoneyWise]

What Is Property Tax?

This gives a good description as to what the property tax is used for in a general sense.

In other states personal property such as cars are assessed and taxed also but that does not mean the taxpayer does not own the vehicle.

 

[kwillia]

What Is Property Tax?

This gives a good description as to what the property tax is used for in a general sense.

In other states personal property such as cars are assessed and taxed also but that does not mean the taxpayer does not own the vehicle.

If you don't pay the tax the government confiscates the property. If the government wants to put a road through the property they can chose to do so. The government can tell you what you can and can't do with your property.

 

[ProfMoneyWise]

If you don't pay the tax the government confiscates the property. If the government wants to put a road through the property they can chose to do so. The government can tell you what you can and can't do with your property.

Points taken.

Given the choice between having debt or not I choose the former.

I have some control I suppose. I plan to pay my taxes and if they do choose to put a road through my property I have some faith in compensation.

As for the last point I'm an HOA type so I am not a good point of contention on that one.

 

[kwillia]

Points taken.

Given the choice between having debt or not I choose the former.

I have some control I suppose. I plan to pay my taxes and if they do choose to put a road through my property I have some faith in compensation.

As for the last point I'm an HOA type so I am not a good point of contention on that one.

I do understand your point and I agree that having your house paid off is the ideal, but I feel it is misleading for anyone to say we can own a house when we are on the hook for thousands and thousands in taxe each year even when we are in our retirement years and most likely living on a fixed income. As for HOAs... I purposely don't live in a neighborhood and I can't imagine not being able to park our commercial vehicles on our property or to not be allowed to have the 5 cars and trucks parked in our driveway that we currently have or to not be able to throw parties whenever we want or to not be able to display the American flag or to have antique tractors or to let my son do mechanical work on vehicles in the driveway or to not be able to etc. etc. etc. We like the freedom that comes from not being in a neighborhood and having a HOA.

 

[ProfMoneyWise]

Quick point. Dahlia HOA has no issue with the display of the flag.

 

[ginwoman]

Don't pay a fee to do what you can do yourself.

Divide your payment by 12 and send in that amount as extra principal each month or just save up 1/12th each month and send that in once a year.

It equates to approximately 8 years of a reduction on a 30 year mortgage.

Look into a 15yr fixed and do a re-buy at a very low rate. You may find the cost to do so to you per month as far as a payment goes may be very doable and close to the same amount you are looking at with adding the 1/12th payment.

Good thinking either way. Owning where you eat and sleep is liberating.

OK when you say divide your payment by 12...do you mean just the principal or the total (which includes taxes & insurance)?

 

[GWguy]

OK when you say divide your payment by 12...do you mean just the principal or the total (which includes taxes & insurance)?

I won't say it doesn't matter, but you are putting this extra money against the principal only. So if you calculate with principal you put 'x' dollars towards the principal. If you calculate with both principal AND insurance, you put 'y' towards the principal, and 'y' will always be much higher than 'x', and therefore reducing your principal even faster.

Example: Your mortgage is $1500/mo, 800 of which is principal, and 700 is insurance, you could put an extra $800 towards the principal in a year, or $67 more a month, or $1500 towards the principal in a year, or $125/mo. Obviously, $125 is better than $67.

Those are guidelines. ANYTHING you can put against the principal will help reduce the number of years you pay. The more you can afford to put into the principal, the faster you can get out from under the mortgage.

 

[blazinlow89]

OK when you say divide your payment by 12...do you mean just the principal or the total (which includes taxes & insurance)?

I am going to do the total without escrow. Which is $1062, or $88.5 a month. Also since I am switching to bi-weekly payments I will essentially make 2 extra payments a year. Calculator said payoff time will be about 18-20 years vs 30. Saving over $100k in interest.

Talked about this at work the other day and someone said it was dumb to cut so much interest due to the tax deduction. Seeing as I paid $4500 in interest since July 1, and my tax return will only see about $1000 of that. Getting and extra $2000 back each year sounds nice, but not paying $100k over the course of the loan sounds even better.

 

[ProfMoneyWise]

Your co-worker has fallen for the tax deduction myth.

Think about it. You sent the bank $4,500 in interest to avoid sending the IRS $1,000. You could have just sent the IRS their $1,000 and kept $3,500 at home.

You are doing the right thing, keep going.

 

[Rommey]

Your co-worker has fallen for the tax deduction myth.

Think about it. You sent the bank $4,500 in interest to avoid sending the IRS $1,000. You could have just sent the IRS their $1,000 and kept $3,500 at home.

You are doing the right thing, keep going.

I have never understood why people think its a good thing to be able to take that deduction. As I said in post 25, not having a mortgage allowed me to concentrate on all the other debt I had and gave us the flexibility to maximize my wife's 403b contribution.

If I had stayed on the original mortgage and made only the minimum payment, I would still have nine more years to pay. Getting rid of that huge monthly cost allowed me to concentrate on the other (as a group) huge monthly debts (i.e., credit card and car loans), and I am within a month of being 100% debt free.

Yeah, it sucks not being able to take that mortgage deduction.

 

[ginwoman]

I

I won't say it doesn't matter, but you are putting this extra money against the principal only. So if you calculate with principal you put 'x' dollars towards the principal. If you calculate with both principal AND insurance, you put 'y' towards the principal, and 'y' will always be much higher than 'x', and therefore reducing your principal even faster.

Example: Your mortgage is $1500/mo, 800 of which is principal, and 700 is insurance, you could put an extra $800 towards the principal in a year, or $67 more a month, or $1500 towards the principal in a year, or $125/mo. Obviously, $125 is better than $67.

Those are guidelines. ANYTHING you can put against the principal will help reduce the number of years you pay. The more you can afford to put into the principal, the faster you can get out from under the mortgage.

This is my line of thinking too. Always has been. But my financial adviser says don't concern yourself with paying off the mtg earlier because in my case paying the extra would put a hardship on our family. We wouldn't have any breathing room. And it makes sense because why totally strap myself down now while I'm 50, just so I can have a "paid for" house when I'm 70 and then get sick and or drop dead?

 

[h3mech]

we got a 10 year mortgage from state farm for 2.75%

 

[GardeningGal]

We used Quicken and got a great rate and they were really on top of things. Craig Wood was our Loan Officer. I can send you his number and email if you like.