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Old 06-13-2007, 12:07 PM
 
Location: Newton, NJ (but my heart is in Tennessee)
311 posts, read 1,374,025 times
Reputation: 279

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Quote:
Originally Posted by MaimounaKande View Post
We could, but we don't b/c it's not really a good investment strategy. We pay 6% interest on the borrowed money, and it's all deductible at tax time. Instead of taking cash and paying it off, we invest that money and bring in much more than 6% a year. So we still get the deductible tax benefit, and use the borrowed money to make more.

Most financial advisors will tell you it's not a great financial move to EVER pay off your mortgage for this reason, although some people feel more comfortable with it paid off, and if it eases your mind, then it's worth it.
As long as you continue to get over 6% a year, I can see doing this, but if not your better off prepaying. You build up equity faster and have less time with a mortgage over your head.

I have heard financial advisors rave about how great it is to be able to take a deduction on the interest, but I would rather not be paying interest at all.
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Old 06-13-2007, 01:44 PM
 
Location: san francisco bay area
300 posts, read 1,846,933 times
Reputation: 165
I really depends on what makes the individual comfortable. My financial advisor told me that it's wasn't a great financial move to EVER pay off one's mortgage, but although I listen to his advice, I don't follow it blindly. I decided that I would rather not have any debt, didn't want to pay the bank any interest, so paid my house off in full. That means that my monthly costs--insurance and taxes (and property taxes are deductible)-- are less than 350.00 per month for a house in the SFBay Area and I can invest all of the money I save by not having to pay a mortgage into instruments that make money. I've always wanted to have as much freedom as possible and I've always believed that freedom from debt is one of the best freedoms one can possibly have.
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Old 06-13-2007, 02:15 PM
 
Location: Newton, NJ (but my heart is in Tennessee)
311 posts, read 1,374,025 times
Reputation: 279
Quote:
Originally Posted by nooneknowsmyname View Post
My financial advisor told me that it's wasn't a great financial move to EVER pay off one's mortgage,
I don't understand why financial advisor's say this. Isn't it better to pay off your debts then be in debt? This does not make sense to me.
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Old 06-13-2007, 02:27 PM
 
Location: Waupun, Wisconsin
323 posts, read 1,965,939 times
Reputation: 136
Quote:
Originally Posted by Dolfan View Post
I don't understand why financial advisor's say this. Isn't it better to pay off your debts then be in debt? This does not make sense to me.
The reasoning is that you can make more on the money that you would have used to pay down your mortgage than you'll pay in additional interest - particularly after taking into account that mortgage interest is a tax deduction if you itemize your income taxes. It is true that you can make some more money this way - IF you invest all of the money that you would have used to pay down the mortgage at a return rate greater than your net mortgage interest rate after any tax benifits. That's a great big if for most people but for those disciplined enough to stick with it there can be financial advantages.

There are, OTOH, emotional rewards from not having a huge debt hanging over one's head
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Old 06-13-2007, 02:34 PM
 
Location: Scottsdale, AZ
4,472 posts, read 17,640,281 times
Reputation: 4095
I'm 26 and I nearly own my house outright (in 2-3 months it'll be mine). Granted I had some financial help from my parents along the way but it's still a great feeling to know that I won't have another monthly payment hanging over my head anymore.
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Old 06-15-2007, 09:31 PM
 
Location: Raleigh, NC
178 posts, read 1,225,339 times
Reputation: 130
"I don't understand why financial advisor's say this. Isn't it better to pay off your debts then be in debt? This does not make sense to me."

You're not alone. Ever hear of Ric Edelman? Try Googling him. He apparently knows quite a bit about money management. And if you want to know his take on mortgages, Google his article titled "Never Own Your Home Outright; Why You Should Get a Big 30-year Mortgage, and Never Pay It Off, Regardless of Your Age and Income". It should help explain the reasoning for having a mortgage.
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Old 06-15-2007, 10:03 PM
 
4,250 posts, read 10,426,498 times
Reputation: 1484
Wow, I don't think is is your standard demographic going on in this thread.

I only know people who owe money and/or people who own nothing (the bank owns more). There is one older gentleman in CA I'm friends with who owns his properties outright, but that is CA and he is 70 something.

Do I only know losers?
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Old 06-16-2007, 08:29 PM
 
1,051 posts, read 3,357,791 times
Reputation: 866
I'm one in the "grey area" here... no, I don't own my home outright (owe in the low 60's) but I could sell it tommorrow and buy a home outright. When I bought it ten years ago everything around here was cows and plenty of them, it had the "scent" alright. Now, ten years later they are long gone, huge shopping centres, restaurants, banks, and business are in their place. This property (1/2 acre) will go commercial in the near future and then I'll sell, I hope to make at a minimum 220k profit... then I'll sell and buy, but not outright, I'd like to keep a 20k or so mortgage. The area where I'll be going (back to where I grew up originally, with family o plenty) is very reasonable, you can get a nice house on a large lot or with land with a full basement and all for 150k as an average. I got lucky for sure, the is no doubt about it. I haven't read through this thread in its entirety nor clicked on all the threads so I'm not really sure why its not said to be wise to pay off a mortgage completely. Without knowing why, the reason I want to is so I can have the taxes, insurance, garbage pickup, plus the small mortgage payment all in one small monthy payment. Plus, it keeps the good credit line going.
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Old 06-18-2007, 10:08 AM
 
73 posts, read 346,138 times
Reputation: 112
I own my house but it's not the kind of house most people would want to own. It's an old cement block house that my parents built piece by piece as they could get the money together, & now it's mine. I could never afford a new house but it's o.k. because I have lived here since I was 2 & love it dearly. It's in need of a lot of work but I just save up & do a little at a time. It's definitely "HOME".
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Old 06-18-2007, 03:13 PM
 
Location: WV
74 posts, read 469,577 times
Reputation: 37
I'm 27 and own in full. Its a wonderful feeling!
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