Posted on: 09th Jun, 2010 08:15 am
Is it better to pay off a mortgage early. 15 yrs vs 30yrs ?
I am 50 yrs old, 300 K in income. I will continue to work for 10 more years
I am 50 yrs old, 300 K in income. I will continue to work for 10 more years
Hi Farnhamron,
In my opinion, it is better to pay off mortgage early and save money in interest. A 30 year mortgage offers you a low monthly payment as the loan is amortized over a longer period of time. But we tend to overlook the fact that a long repayment period means more of interest payments. The longer the term of the mortgage the more money you pay in interest in the long run. Thus, the earlier you pay off your mortgage, the more money you save in interest.
Now many argue that when you pay off mortgage early, you lose the tax deduction. Is true that mortgage interest tax deduction is an important factor to consider. But I think the money you save by prepaying your mortgage outweighs the tax deduction your receive. For instance, if you are in a 25% Federal tax and a 5% state tax bracket, you will get $250 back from the IRS and $50 from your state for a payment of $1000 in interest. But what about the rest of ($1000-300) or $700? You lose that money to the mortgage company, right? Now, if you had paid taxes of $300, the rest of the $700 would have remained with you. You could have invested that money somewhere else for a high return.
In my opinion, it is better to pay off mortgage early and save money in interest. A 30 year mortgage offers you a low monthly payment as the loan is amortized over a longer period of time. But we tend to overlook the fact that a long repayment period means more of interest payments. The longer the term of the mortgage the more money you pay in interest in the long run. Thus, the earlier you pay off your mortgage, the more money you save in interest.
Now many argue that when you pay off mortgage early, you lose the tax deduction. Is true that mortgage interest tax deduction is an important factor to consider. But I think the money you save by prepaying your mortgage outweighs the tax deduction your receive. For instance, if you are in a 25% Federal tax and a 5% state tax bracket, you will get $250 back from the IRS and $50 from your state for a payment of $1000 in interest. But what about the rest of ($1000-300) or $700? You lose that money to the mortgage company, right? Now, if you had paid taxes of $300, the rest of the $700 would have remained with you. You could have invested that money somewhere else for a high return.
I would like to payoff my mortgage early and, I need to know what fees would be charged.
what fees are involved in this process?
Hi barbara!
Welcome to forums!
You need to check out whether or not there is a clause of pre-payment penalty mentioned in your loan docs. If no such clause is mentioned in the loan docs, then you won't be liable for any fees though you pay off the loan early.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
You need to check out whether or not there is a clause of pre-payment penalty mentioned in your loan docs. If no such clause is mentioned in the loan docs, then you won't be liable for any fees though you pay off the loan early.
Feel free to ask if you've further queries.
Sussane