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Old 01-04-2019, 06:48 AM
 
4,418 posts, read 2,584,588 times
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Quote:
Originally Posted by mathjak107 View Post
be careful here because you can take tax free excluded gains and make them in to taxable gains by exceeding the rolling 5 year period if you can't sell the house in time . plus any tenant problems and you have the burden of supporting both houses .
Turning it into a rental is a good idea only if the OP can stomach damage from tenants, repair bills and loss of rent because of vacancy.

As noted i was also thinking what mathjak just said.
Be careful az mathjak noted.

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Old 01-04-2019, 06:50 AM
 
71,044 posts, read 71,338,147 times
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well that too , but they can lose the entire tax free exclusion if they pass the window selling. that would be most un-good if they have a lot of equity
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Old 01-04-2019, 06:51 AM
 
5,399 posts, read 2,257,030 times
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Quote:
Originally Posted by tommy64 View Post
15 yr @ 3%.

Pay it off...? NO!!!!!!

This.


Save that money instead and invest.
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Old 01-04-2019, 07:43 AM
 
Location: NJ
24,037 posts, read 30,143,709 times
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Quote:
Originally Posted by semispherical View Post
Hereís a question for all you financial gurus. I am trying to decide whether it makes sense to pay off my mortgage at the beginning of 2019. Here are the facts:

The property is my residence. The remaining principal is about $100K. It is a 15 year mortgage at 3%. If I let the mortgage amortize to the end of the 15 years (2027), I will pay about $20K in interest over that time.

I plan to sell within about 2 years and downsize to a smaller property. If I sell at the end of 2020, I will have paid about $7500 in interest up to that time.

The money I would use to pay down the mortgage is currently in a savings account at the credit union earning about 1%.

I also have a ladder of CDs that I could use to put a down payment on a replacement property and the feds have started making me take RMDs from my 401(k) so I wonít be cash poor.

Until now, Iíve had enough deductions to itemize and the mortgage interest has been a big part of it. But with the rewritten tax law it is going to make more sense to take the standard deduction unless I have huge unanticipated medical bills, so I lose any tax advantage to keeping the mortgage.

The way I am looking at this is that even though the 3% interest Iím paying is a screaming good deal, Iím only earning 1% on the savings account, so might as well put that money where it will do me more good. I will also save at least $7500 in interest payments, assuming I sell by the end of 2020. The downside is that I will be less liquid by $100K. It seems that paying the mortgage off is marginally better financially and has a nice psychological kick to it as well.

Have I missed anything?

Thanks!
if you are selling it in a couple of years then i wouldnt bother. i probably wouldnt bother anyway but it doesnt seem to make sense to do it given you will be paying it off in 2 years anyway.
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Old 01-04-2019, 08:55 AM
 
927 posts, read 818,546 times
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Quote:
Originally Posted by JonathanLB View Post
The interest isnít really deductible for many people. If state taxes and property taxes are only deductible up to $10,000 or whatever thatís absolutely nothing. Thatís blown for me way before we even get to property taxes, so it has no more benefit anymore since the new tax law.
Correct! at 3% I no longer pay enough mortgage interest to itemize.
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Old 01-04-2019, 09:00 AM
 
927 posts, read 818,546 times
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Quote:
Originally Posted by EricBoyd View Post
Have you considered letting your current home become a rental, when you decide to purchase another? Let rent income pay your mortgage (and then some?).
Quote:
Originally Posted by mathjak107 View Post
be careful here because you can take tax free excluded gains and make them in to taxable gains by exceeding the rolling 5 year period if you can't sell the house in time . plus any tenant problems and you have the burden of supporting both houses .
Quote:
Originally Posted by galaxyhi View Post
Turning it into a rental is a good idea only if the OP can stomach damage from tenants, repair bills and loss of rent because of vacancy.

As noted i was also thinking what mathjak just said.
Be careful az mathjak noted.

Oh, no, no, no! That's where the $100K came from: I finally unloaded my rental property (rented because I couldn't sell in 2010 without taking a huge loss). Being a small time, casual, absentee landlord just isn't worth it, and the tax situation becomes very complicated. I won't ever do it again.
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Old 01-04-2019, 09:04 AM
 
927 posts, read 818,546 times
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I'm keeping the mortgage; I bought a short-term CD and a corporate bond that each pay closer to 3% than what the credit union is giving me.

It will be very interesting to see where interest rates go, given the current market turmoil.
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Old 01-04-2019, 02:01 PM
Status: "Re-edit status" (set 11 hours ago)
 
Location: Was Midvalley Oregon; Now Eastside Seattle area
4,001 posts, read 1,844,762 times
Reputation: 3050
No.
If you are in retirement or entering retirement and you wish to buy another home, Paying off a mortgage wil cause you lose the leverage of cash downpayment, buyer's creditability, AND possible reduction of credit score.
Cash is always liquid. RealEstate is not liquid nor is it a full value asset for borrowing purposes.
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Old 01-05-2019, 08:50 AM
 
4,716 posts, read 1,177,791 times
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Quote:
Originally Posted by homelessinseattle View Post
Since you're going to move I would say no. Short term CD's are paying over 2%. Get a Fidelity account.
Agree.
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Old 01-05-2019, 10:02 AM
 
Location: Florida -
8,753 posts, read 10,794,020 times
Reputation: 16592
IMO, the advantage/disadvantage of paying off one's mortgage is a moving target.

1. Low interest rates are great (3-percent) - as long as one has the mortgage money invested elsewhere at a higher rate. Otherwise, one is still paying interest, mortgage insurance and associated fees.

2. Many derive more peace of mind from having a paid-off mortgage than others. This may depend on the volatility of one's situation ... or on one's background and emotional attitudes toward money.

3. Liquidity and flexibility - Will paying off the mortgage limit one's ability to take advantage of opportunities or restrict one's ability to respond to emergencies. These days, a HELOC is almost as difficult and time-consuming as taking-out a new mortgage.

4. Funds available AFTER paying off one's mortgage. Being 'house rich,' particularly in a roller coaster market, is not a particularly desirable position. Additionally, if paying off one's mortgage leaves one's lifestyle too close to the edge, they are likely to build up more costly debt elsewhere.

BTW, we've paid-off multiple mortgages (or bought for cash) over the last 15+ years - Even though we've got available funds to comfortably go either way, the no mortgage route works best for us.
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