About Jamie Novak Expertise Clutter over taking your house? Time management challenges? Can`t say “no” without feeling guilty? Household management issues? Need at take time for yourself? Trouble balancing work and life? Want to find your true passion in life? Want to reach your goals and dreams? Do you just want to simplify your life? Then I can help by answering questions is all these areas of your life!
Experience I am HGTV's Mission: Organization Season 3 Professional Organizer. I am writing my 2nd book, the first is A Busy Person's Guide to a Life You Love! I have been helping people conquer clutter for 14 years. I work nationally, offering clutter clubs, speaking engagements, and televion appearances.
Question Hi Jamie,I would like to know if it would be wise to pay off my house mortgage. I am 45 years old and owe 85 thousand on my note. I have heard it is not a good idea because of tax reasons but I cant stop thinking of all I can do with the extra 1100 a month I will be saving. I plan on working another 10 years and do not want a mortgage..............thanks for your time.....jim
Answer Hi Jim,
Thanks for your question. I am a Porfessional Organizer who offers advice and the only heading that matches even a little is the finance one.
However I do not want your question to go unanswered. I've tracked down some resources for you that I hope will help. Just keep in mind I am in no way a financial consultant.
This is a site that will calculate the savings, it looks good:
Also some other information:
Who should pay off their mortgage earlyMortgage burnings, like barn raisings and sock hops, are a relic of another era. In our mobile society, most of us don't stay in our homes long enough to pay off a 30-year mortgage. And even if you can afford to retire your mortgage early, many financial planners believe there are better ways to invest your extra cash.
Still, there's an unquantifiable sense of security that comes from owning your home. In addition, making extra payments on your mortgage will save you thousands of dollars. On a $200,000 mortgage, making just one extra payment a year could save you more than $65,000.Those are powerful numbers. And if you've been burned by the stock market in the past couple of years, you may feel your home offers a much better return.There are equally powerful arguments against paying off a mortgage early. Long-term mortgage rates are now hovering around 7% (if you're paying much more than that, stop reading and go refinance). If you deduct mortgage interest from your taxes and you're in the 27% tax bracket, the actual rate is closer to 5.1%. Which means any investment that earns more than 5.1% will provide a better return on your money.There are other ways to invest your extra cash that will provide even more security than a paid-off mortgage, says Keith Gumbinger, vice president of mortgage tracker HSH Associates. Some examples:Your retirement. Before you put extra money toward your mortgage, make sure you've taken full advantage of tax-advantaged retirement savings plans, such as your 401(k) and an individual retirement account. Owning your own home won't provide much retirement security if you can't afford to buy groceries.Insurance. If you have dependents, you need life insurance. Make sure your policy provides enough money to cover your family's mortgage, living expenses and education costs. Disability insurance, while more expensive, is also a good idea. Your family will be protected if you're unable to work for a long period of time.An emergency fund. Most financial advisers believe you should have enough in savings to cover your expenses for six months to a year.And you shouldn't even think about prepaying your mortgage if you have other high-cost debts. Credit card interest rates are more than twice that of most home mortgages. Extra cash should go toward paying off the balance.Pay-down candidatesPaying off a mortgage early benefits some homeowners more than others, says Greg McBride, financial analyst for Bankrate.com. Who stands to benefit the most:Homeowners who don't deduct mortgage interest. If your mortgage is small, your interest may not exceed the standard deduction the IRS gives non-itemizing taxpayers. Without the tax break, the actual cost of your mortgage is higher. Paying it off early makes sense.Homeowners who pay private mortgage insurance. Lenders typically charge PMI to borrowers with less than 20% equity in their homes. If you're close to 20%, making extra payments could put you over the top. Eliminating PMI will reduce your monthly payments, so you'll get an immediate return on your investment, McBride says.How to do itMany lenders offer products designed to help you pay off your mortgage ahead of time. For a fee, they'll arrange to have the money withdrawn from your bank account twice a month. Each payment will be half your regular monthly payment. But because there are 26 biweekly periods in a year, you end up making the equivalent of 13 monthly payments.Those arrangements are convenient, but you can set up your own accelerated schedule for free, says Dan Gilbert, chief executive officer for Quicken Loans. One method is to take your monthly mortgage payment, divide it by 12, and add that amount to each monthly payment.Another is to simply make an extra mortgage payment at the end of the year.Whichever method you choose, make sure you specify that the extra payment should be applied to the principal on your mortgage, Gumbinger says.Finally, before stepping up your payments, make sure your mortgage agreement contains no penalties for early payment. Most conventional mortgages have no such restrictions, Gumbinger says. Some adjustable-rate mortgages contain penalty clauses, but they're usually limited to large paydowns early in the mortgage.
Should you pay off your mortgage early? by Doris Dobkins
Interest rates went down this week and many people are refinancing their home mortgages once again. When you refinance, it's important to make decisions based on your personal and financial goals in life.
In this article, we are going to discuss the topic of paying off your mortgage early and why you might or might not want to.
So, what about you? Where do you stand on this issue or are you as confused as many of us? The book called "Ordinary People Extraordinary Wealth, A New York Times best seller, by Ric Edelman states in his findings that most of the 5000 people he surveyed with extraordinary wealth still carry a mortgage.
While most of us have heard all our lives that it is better to pay off our mortgage as quickly as possible, both sides make some strong arguments for their case.
Here are a few reasons for Paying Off Your Mortgage Early:
1. You want more than anything to be 100% debt free.
2. You want to have more choices and options for your future and no debt gives you this option.
3. You want to retire early. With no mortgage payment, you can save up for retirement faster and quit sooner.
4. You want a guaranteed rate of return. Paying off your mortgage guarantees you that savings rate. Investing in the stock market can never guarantee you anything.
5. You don't itemize but take the standard deduction.
6. You live in Canada or another country where these is NO tax benefit to carrying a mortgage.
7. You are disciplined enough that once you have paid off your mortgage, you will invest the same payments into a retirement fund until you have enough to meet your retirement needs. (Remember, with no mortgage, your required retirement income will be greatly reduced.
Looking at the other side, here are a few reasons for NOT Paying Off Your Mortgage Early:
1. You primary financial goal is to obtain great wealth.
2. You want to leverage your assets to help you achieve your goals more quickly. Using someone else's money is better than using your own.
3. You are in a high tax bracket and this additional deduction lowers your income tax bracket as well as your taxes.
4. You think you can get a better return in another investment (i.e. stock market, real estate, rental property, etc.)
So the decision to pay it off or keep it as long as possible boils down to your personal goals. What do you want to accomplish with your money and what do you want to achieve financially?
Personal Peace of Mind and Financial Freedom isn't for all. Some would rather take risks where the rewards can be significantly greater than playing it safe. Bottom line? We all need to decide for ourselves what will work best for us.
I hope this helps, best of luck making a choice. For what it is worth, my personal opinion is I'd rather not owe anyone regardless of a tax break....Jamie
