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Yes, my CPA and a financial advisor friend of ours didn't agree with us when we paid off our mortgage last year. The tax benefits versus the savings of paying off the loan 18 years early just didn't make any sense. We now take the exact same amount that we sent to the mortgage company every month and save it in a money market account. Hopefully, we will never lose any money in this account. :-)
We also own our office condo outright. Bought it at the right moment for cash. We plan on keeping this and renting it to a medical dctor when we retire.
I used to own the house outright, but after Katrina we had to do a mortgage to put her back together again. It's cost more to rebuild her that what we paid for her
I used to own the house outright, but after Katrina we had to do a mortgage to put her back together again. It's cost more to rebuild her that what we paid for her
Didn't you have insurance or were you one of the ones that got ripped off by your insurance company?
Yes, my CPA and a financial advisor friend of ours didn't agree with us when we paid off our mortgage last year. The tax benefits versus the savings of paying off the loan 18 years early just didn't make any sense. We now take the exact same amount that we sent to the mortgage company every month and save it in a money market account. Hopefully, we will never lose any money in this account. :-)
Good for you.
This is a huge myth that it is good to have a mortgage for tax purposes.
Anybody saying that is a bit of an amateur and pretending there are no viable options. Especially those other amateurs who masquerade as financial experts.
In fact there are a number of options, including ones how to deal with your taxes.
Paying off the mortgage, frees up cash, that can be used to "Buy Tax Credits". Many ways to do it. A common way is Low Income Housing Credits". Basically there is a set of rules you follow to figure out exactly what is available to you. In simple terms, you are in effect giving a company a loan, they use the collective loans from many peeps to build low income housing. In effect you are like a share holder but reap a great tax benefit over the term of the loan, typically something like 15 years. In the end, the properties are sold off, money redistributed and historically that has generated a capital gain on top of the tax benefit. These things are organized and packaged into an issue that has an identifying number. The particular issue is either "Open" (when they are raising the money for a particular set of projects) or "Closed" (Once it is fully subscribed - there is no more available of that issue directly from a managed fund source)
Simple example, you give them $50K for 15 years. You get something like a tax credit of $3K + per year. That is a credit not a deduction which offsets tax dollars owed, dollar for dollar. Your rate of return is at least somewhere in the area of your tax rate, can be greater. Historically many of the funds returned something like 3 - 4 percent per year on the capital gain at the end.
Not easy to understand, you got to find the right peeps to buy it. Your taxes can be a bit more complex until you get it all sorted out. The funds do help you for the first year. The other big advantages, is the tax credits can be carried forward if you don't use it all in one year. It can be used to protect / shield just about any source of income. Far better deal tax wise to pay off the mortgage, take the money, buy tax credits, far more flexible, makes you far more secure.
There is a bit of dialing it all in for your particular situation. What do the rules allow, what do you need, Devil is in the details.
Don't let anybody tell you it is great to have a mortgage. Pure bunk. Every angle is worse. Financial, mental, happiness, hassles. In fact it is difficult to be truly free if you owe anybody anything. Some "Expert" is always telling you exactly how to Love Your Chains.
Home ownership has never been traditionally an investment. It was always a great shield against inflation. Do not believe that investment bunk either. To make money in a house, you must have some sort of bubble or inflation going wild. That can be an illusion also, the dollars may have to be adjusted for actual purchasing power. The only peeps who make money consistent are the scum who have learned to be the perfect parasites from you owning a house. Cut all of them out of the buying / selling, only true way to do that is buy the house cash.
Never trust those who have a built in self interest in anything to do with money, especially if they stand to gain a lot of yours.
I'm not sure how to do a poll and too lazy to investigate, but I am wondering how many of you or how many people in general own their homes outright?
From what I've heard and read, it's not that common, unless you are retired or older. Anyway, just curious.
There is a real psychic benefit to doing so, even if there's no mortgage tax write-off.
This is a category in city-data.com statistics info for each state, but it's lots of work to muddle through to find. WV has a high rate of ownership because the sticker prices on the houses remained reasonable. I think elsewhere it's less so for many reasons, but root cause is sticker prices skyrocketed while wages remained fairly frozen. The market defied all logic, and banks/ realtors/ and county tax assessors had no motivation to keep things real. Your thread will yield anecdotal information but I think it will explain the details of the greater trends in the states.
I own my house outright because I saved for a down payment in my hometown but RE just got too insane so I started looking elsewhere. I was averse to the mortgage trap I saw others volunteering for and knew that the loss of a single job or a health crisis was the difference between them being homeless or not. I couldn't will myself to follow. Glad I listened to my instincts on this one in light of mortgage crisis. Long Island had already been through this in the 80's where a 70k home was over valued at 250k overnight. When the bubble burst with the snap of a finger, people were broke because it was valued down to 160k. The ones selling the 70k home were the winners, everyone else the sap. This last bubble they got their money back, passing on the over valued 350k sticker price to the new sap. Who knows what the market will correct out to be?
I remember reading in a few places about real estate-- it's always cheaper to pay property taxes than it is to pay amortization interest. Maybe not so when interest rates were enticing, property taxes are 7k a yr for a hovel, and you had a crafty accountant. I think the keep it simple stupid plan works better for me if for no other reason than the security factor. Be it ever so crumble, it's all mine. My taxes are $600 a yr. I'm content.
You know, I'm not Susie Orman but to me it makes no sense NOT to own your house outright if you have the money to pay for it.
The whole idea of financing something and paying almost twice what it cost in interest over the years to get that mortgage interest write off is an idea that has been used by mortgage lenders to sell their product, IMHO.
The money you get back on your taxes in mortgage interest never equals the money you're paying to the bank so all you're doing is paying hundreds of dollars every month to banks that you could be using for other things.
It's a secure feeling when you know that your house is paid for.
Actually, if you look at a 30 yr amortization schedule, a 100k house will have cost you 300k by the time you are done. Banks have always set up the rules in their own favor through legislation. By the end of the road it's far more than half, plus all the liability from day one, plus you never actually own anything if at any time it can be repo'd by a whole host of characters (3 layered gov't taxes, bank, 2nd mortgage company, insurance co failure, eminent domain etc).
I think people who've been burned by the whole slew of characters lining up to shake down homeowners are the real reason some prefer to keep it simple and stay in rentals. They get unhappy with how the neighborhood changes or local taxes get out of hand, easy enough to move on with minimal hassles if you own less. Put a resume on monster.com and off we go.
I'm 29 and I Own it. I also own several rental properties and still owe on a few. I am fortunate to have a good job and have family in rental properties that pointed me in the right direction just after high school. If you want to OWN your home, its not about the amount of money you make, its about what you do with the money you have.
That is great! My son too owned his home outright at the age of 29. He has a beautiful home in Florida!
Can you give us some more information on this? "A common way is Low Income Housing Credits" I would be interested. I have 2 homes that i own outright that I am renting out. I have my current residence that has a mortgage of less then 6%....that is the only reason I do not pay it off, since I have investments that were earning more than 15% a year for the past 5, this year, total investments are down 4% YTD.
Quote:
Originally Posted by Cosmic
Good for you.
This is a huge myth that it is good to have a mortgage for tax purposes.
Anybody saying that is a bit of an amateur and pretending there are no viable options. Especially those other amateurs who masquerade as financial experts.
In fact there are a number of options, including ones how to deal with your taxes.
Paying off the mortgage, frees up cash, that can be used to "Buy Tax Credits". Many ways to do it. A common way is Low Income Housing Credits". Basically there is a set of rules you follow to figure out exactly what is available to you. In simple terms, you are in effect giving a company a loan, they use the collective loans from many peeps to build low income housing. In effect you are like a share holder but reap a great tax benefit over the term of the loan, typically something like 15 years. In the end, the properties are sold off, money redistributed and historically that has generated a capital gain on top of the tax benefit. These things are organized and packaged into an issue that has an identifying number. The particular issue is either "Open" (when they are raising the money for a particular set of projects) or "Closed" (Once it is fully subscribed - there is no more available of that issue directly from a managed fund source)
Simple example, you give them $50K for 15 years. You get something like a tax credit of $3K + per year. That is a credit not a deduction which offsets tax dollars owed, dollar for dollar. Your rate of return is at least somewhere in the area of your tax rate, can be greater. Historically many of the funds returned something like 3 - 4 percent per year on the capital gain at the end.
Not easy to understand, you got to find the right peeps to buy it. Your taxes can be a bit more complex until you get it all sorted out. The funds do help you for the first year. The other big advantages, is the tax credits can be carried forward if you don't use it all in one year. It can be used to protect / shield just about any source of income. Far better deal tax wise to pay off the mortgage, take the money, buy tax credits, far more flexible, makes you far more secure.
There is a bit of dialing it all in for your particular situation. What do the rules allow, what do you need, Devil is in the details.
Don't let anybody tell you it is great to have a mortgage. Pure bunk. Every angle is worse. Financial, mental, happiness, hassles. In fact it is difficult to be truly free if you owe anybody anything. Some "Expert" is always telling you exactly how to Love Your Chains.
Home ownership has never been traditionally an investment. It was always a great shield against inflation. Do not believe that investment bunk either. To make money in a house, you must have some sort of bubble or inflation going wild. That can be an illusion also, the dollars may have to be adjusted for actual purchasing power. The only peeps who make money consistent are the scum who have learned to be the perfect parasites from you owning a house. Cut all of them out of the buying / selling, only true way to do that is buy the house cash.
Never trust those who have a built in self interest in anything to do with money, especially if they stand to gain a lot of yours.
We have owned our home free and clear for over 20 years and hope this one sells so we can move to other home which is free and clear.We were told contract would be signed Wed or Thur. Without owning life would not be as pleasant.
Can you give us some more information on this? "A common way is Low Income Housing Credits" I would be interested. .
You can web search on the general subject. I get mine thru Boston Capital, again you can web search for them.
It is like any type investment, you have to understand exactly the deal you are being offered. They do vary with time and the terms involved, may not be the same from different folks.
As mentioned before essentially it is a loan. At the end of the loan period, the principal is returned. That is not exactly guaranteed, as the amount available is based on the sales of the properties built under that particular issue. Historically from the source I have been using, the amount was always greater than the principal and that excess was returned as a capital gain. I guess in theory you could have a partial loss of the principal but if it did happen, that could be used as a tax deduction as any other capital loss.
I did ensure I only got issues in certain areas, in general Boston Capital avoided the "Hot Markets" on both coasts and areas with high land prices. These type of properties have always resold well, many being acquired local at the end of the loan period as continued programs based around community low income housing, with the baby boom the demand should always be there in the near future. Lots of them are related to senior citizen type projects. From my experience, the projects were well managed and had good cost control.
The benefits tend to ramp in, like around 3 years, goes flat for the mid term of the load and then ramps down at the end. Example, you give them, $50K, the tax benefit is lowest the first year, increases for the next two years, then max's out and remains fairly constant for 9 years or so, then decreases at some rate for the last three years. The first year is a bit difficult to guessimate your exact tax credits but my experience was the original numbers worked pretty close. I got the credits I needed, had figured it a bit heavy, just in case, been rolling some credits forward.
You can ladder different issues to always have the credits desired. Probably what I will do. One way to guage what is happening a decent deal gives you something close to the principal amount over the load period as tax credits. Your benefits are on a Sch E and Form 3800 filing, there is a few more forms to justify / figure the amounts for your particular tax situation. The way it works can shield just about any source of income, including a way to get around the taxing of social security benefits for higher incomes above the $25K limit. You can legally owe no taxes using the credits.
Do not have to be a homeowner to take advantage of it. Just have to pay Fed taxes and have some free cash, have what could be described as an income. The return can be immediate as you can change the W-2 to anticipate the results. Is a good way to use some of your wealth, pretty low risk way to get a reasonable return.
If you have a mortgage, are capable of paying it off early and diverting the excess cash into tax credits in some cross over scheme, you will be far, far better off after a number of years. Paying banks interest is a dead horse in most situations. The most secure position is too always fully own the roof over your head.
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Scum and tax deductions.....Bogus advice.
