Paying off My Home:)

Rae · Posted: Sun Oct 29, 2006 10:24 pm Post subject: Paying off My Home:)

:D Hello everyone, Just found this great forum. I have read thru some of your topics but don't see my question. I am wanting to pay-off my mortgage. I purchased the home in '93 for 115,000 at 6.5%. I put a considerable amount down on it and have been making extra principle only payments of $100 per month since. My pay-off is about $32,000.
It is presently worth about $280,000 but will continue to live in it. I think, ?? I am getting ready to retire from my work of 29 years with a good retirement plan and move onto fun things. I probably will work again after a year-long rest. My question... Is there a better QUARTER in the year to pay-off? A better MONTH of the year to pay-off? And all the underlying questions I am not thinking to ask! Thank you to all the experts for manning this board. You are needed! :D

m2c · Joined: 03 Aug 2005 Posts: 937

Unless your real estate taxes are ENORMOUS (or you are making huge charitable gifts) you are realizing no tax “benefit” from the interest paid on your $32K mortgage on the federal side. The effect of home ownership is usually less “beneficial” on the state tax side. So pay off the mortgage when it suits you. Only preference you’re abandoning is liquidity. Timing is not material unless you have a FHA mortgage (effectively must be paid off at end of month so monthly timing is “important” but at $32K not material).

You might consider slapping on a HELOC for $100K (IRS deductibility limit, often ignored) so if you need “pin money” during your first year of retirement,

Rae · Posted: Mon Oct 30, 2006 1:11 am Post subject:

Thank you m2c, Well yes, I think my property taxes are way to high, but who doesn't? I am concerned about the loss of deductions on my current $3,200 a year property taxes. And I know it will keep going higher each year. I need to, but have not had time to run the numbers, with and without this deduction. I definitely want to keep this deduction while I am working. Something I really should think about is, in a year or two when I have the poop back in me and return to possibly part-time work, my income will go high again and I may not have that deduction. Hummm, You make me think :roll: . I really think that sitting my lawn chair up at city hall(protest property taxes :!: ) is way more fun than to continue paying a mortgage though. And I will have the time! Woohoo!

I would think your reference to 'real estate taxes' would be the same as 'property tax'? I will read up on 'HELOC's. Thank you again, m2c.

Rae · Posted: Mon Oct 30, 2006 2:37 am Post subject:

NO, NO! I don't need a HELOC! (didn't know what it was?)
Waaaaaaaaa! Can somebody make... m2c ...go away!!!?

Ha Ha! Just Kidding! No m2c, you don't have to go...'cause I can take ya! :evil: I am fine without a 2nd equity. I have a great retirement income(defined benefit) if I want to take it now. If not I make 6% per year if I leave it on the table prior to age 62? I am 50 now. That is better than the bank...almost. I have other investments as well, 401K, Roth Ira, Mutual funds, other property, and some company sponsored money purchase accounts. I will be OK without borrowing but I understand you... that is your business.

m2c · Joined: 03 Aug 2005 Posts: 937

Don’t think you fully understand HELOCs. It cost you nothing to “get in” but it essentially short-term, in-and-out money. Since short-term rates are now higher than those farther down the yield curve, the interest cost is “expensive” but, again, HELOCs are meant (or should be used) for short-term, transitional desires. You don’t tap into the HELOC, no interest is charged. There is an “option cost” to keep the line open – usually in the $50 to $100 annual range. If you have other liquid accounts, HELOC may not be the best way to go but it does provide instant access to funds if and when needed. By paying off your existing first mortgage you’re “giving up” $32K in liquidity thereby reducing interest by roughly $170 per month. A HELOC is a way to replace the availability of that liquidity but, if you need to use it, at a rate of about 1.5 to 1.75 percentage points higher than what you’re paying now. With today’s rate structure, you use; you loose with a HELOC. More a peace of mind issue.

Mortgage and real estate deductions (interest property taxes) are not relevant until all your deductions exceed the standard deduction and then only to the extent that they exceed the standard deduction. The smaller the mortgage, the less the “benefit”.

chow · Posted: Mon Oct 30, 2006 12:01 pm Post subject:

"The smaller the mortgage, the less the “benefit”."

:evil: :evil: :evil: :evil:

Yeah- if that shell shocker hasn't hit you yet-just wait until you fire up your tubo tax and see what paying down, or paying off a mortgage get's you with Uncle Sam!