Comments on: The Pros and Cons of Pre-Paying a Mortgage http://frugaldad.com/2010/04/19/pros-and-cons-pre-paying-mortgage/ Money Saving Insights: Coupons, Smart Spending and Promotional Codes Mon, 13 Feb 2012 05:38:35 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Melissa http://frugaldad.com/2010/04/19/pros-and-cons-pre-paying-mortgage/#comment-40881 Melissa Sun, 02 May 2010 16:01:23 +0000 http://frugaldad.com/?p=5233#comment-40881 A note on property taxes are that they vary WIDELY by county/city/school district/utility district/community college district/etc. My house is assessed at 121,000 and I pay $2500 per year in property taxes (I live in a very affordable Midwest town.) The numbers posted by CM are likely accurate for his area. Another item to keep in mind, however, is CM's area may be heavily funded by property taxes with considerably lower sales and income tax rates. Or maybe he lives in an area with high rates on all three. Talk about a trifecta. A note on property taxes are that they vary WIDELY by county/city/school district/utility district/community college district/etc. My house is assessed at 121,000 and I pay $2500 per year in property taxes (I live in a very affordable Midwest town.)

The numbers posted by CM are likely accurate for his area. Another item to keep in mind, however, is CM’s area may be heavily funded by property taxes with considerably lower sales and income tax rates. Or maybe he lives in an area with high rates on all three. Talk about a trifecta.

]]> By: marci357 http://frugaldad.com/2010/04/19/pros-and-cons-pre-paying-mortgage/#comment-40862 marci357 Sat, 01 May 2010 15:45:48 +0000 http://frugaldad.com/?p=5233#comment-40862 CM - I agree with Joanne. My taxes are $788/yr, or $67/month. Home valued at $200,000 which is more than median for our area. In town with all the city amenities. And 10 minutes from the Ocean, with a mountain view, etc. Add $788 to $386 for insurance, and that's $1164/yr... or $97/month. That's pretty darned cheap "owning" in my book :) CM – I agree with Joanne.

My taxes are $788/yr, or $67/month. Home valued at $200,000 which is more than median for our area. In town with all the city amenities.
And 10 minutes from the Ocean, with a mountain view, etc.

Add $788 to $386 for insurance, and that’s $1164/yr… or $97/month. That’s pretty darned cheap “owning” in my book :)

]]> By: Friday Scoop on Credit Karma & Housing Market News | Credit Karma Blog http://frugaldad.com/2010/04/19/pros-and-cons-pre-paying-mortgage/#comment-40846 Friday Scoop on Credit Karma & Housing Market News | Credit Karma Blog Fri, 30 Apr 2010 17:33:34 +0000 http://frugaldad.com/?p=5233#comment-40846 [...] Dad compares the pros and cons of pre-paying a mortgage to help you decide the right home financing for [...] [...] Dad compares the pros and cons of pre-paying a mortgage to help you decide the right home financing for [...]

]]> By: Joanne http://frugaldad.com/2010/04/19/pros-and-cons-pre-paying-mortgage/#comment-40842 Joanne Fri, 30 Apr 2010 14:55:20 +0000 http://frugaldad.com/?p=5233#comment-40842 CM, I am not sure where you got your numbers from but I live on the east coast and my property is valued at $375,000 by county. I pay less than $3,000 in property taxes per year. Use correct numbers please. CM, I am not sure where you got your numbers from but I live on the east coast and my property is valued at $375,000 by county. I pay less than $3,000 in property taxes per year. Use correct numbers please.

]]> By: Holly http://frugaldad.com/2010/04/19/pros-and-cons-pre-paying-mortgage/#comment-40801 Holly Thu, 29 Apr 2010 12:45:46 +0000 http://frugaldad.com/?p=5233#comment-40801 Yes, I understand marginal tax rates. For instance we would be in the 28% tax bracket, but we fall into the 25% since we contribute 10% gross to a deferred compensation plan and have itemized for years, which it where I am including the mortgage interest deduction benefit. This helps to avoid having my (small in comparison to my husband's) earnings being taxed at the higher tax bracket of 28%. My point about selling the house is that if, in the next few years, we see growth in the market, you will likely make gains on a house with just an increase in market value. No need to tie up extra funds in paying down a mortgage...I'd rather put it in a fund or other growth investment and take advantage of the mortgage interest deduction. If you do move, you may decide renting is where it's at and no longer have the deduction. Yes, I understand marginal tax rates. For instance we would be in the 28% tax bracket, but we fall into the 25% since we contribute 10% gross to a deferred compensation plan and have itemized for years, which it where I am including the mortgage interest deduction benefit. This helps to avoid having my (small in comparison to my husband’s) earnings being taxed at the higher tax bracket of 28%.

My point about selling the house is that if, in the next few years, we see growth in the market, you will likely make gains on a house with just an increase in market value. No need to tie up extra funds in paying down a mortgage…I’d rather put it in a fund or other growth investment and take advantage of the mortgage interest deduction. If you do move, you may decide renting is where it’s at and no longer have the deduction.

]]> By: Bill in NC http://frugaldad.com/2010/04/19/pros-and-cons-pre-paying-mortgage/#comment-40742 Bill in NC Tue, 27 Apr 2010 21:39:28 +0000 http://frugaldad.com/?p=5233#comment-40742 Paying off the mortgage is NOT a guaranteed return because of the uncertainty of future residential real estate prices. In this market you are risking a decline in principal (maybe your next door neighbor goes into foreclosure). Plus any future gains in residential real estate are unlikely to exceed the rate of inflation. It is of course your personal choice to invest in a relatively illiquid asset (your personal home) but don't think for a moment it is as riskless as depositing that money into a FDIC-insured bank account. Paying off the mortgage is NOT a guaranteed return because of the uncertainty of future residential real estate prices.

In this market you are risking a decline in principal (maybe your next door neighbor goes into foreclosure).

Plus any future gains in residential real estate are unlikely to exceed the rate of inflation.

It is of course your personal choice to invest in a relatively illiquid asset (your personal home) but don’t think for a moment it is as riskless as depositing that money into a FDIC-insured bank account.

]]> By: Julie http://frugaldad.com/2010/04/19/pros-and-cons-pre-paying-mortgage/#comment-40614 Julie Sun, 25 Apr 2010 19:03:16 +0000 http://frugaldad.com/?p=5233#comment-40614 Kevin, When filing your tax return, you have the option to take the greater of either the standard deduction (11,400 in 2009 for married filing jointly) or itemizing your deductions (where mortgage interest comes into play). If you don't have enough qualified expenses to itemize, you can claim the standard deduction. Even with my mortgage interest, I almost don't have enough expenses to make itemizing worthwhile. If legislation is introduced to allow taxpayers to continue to deduct their property taxes without itemizing, I will likely be better off claiming the standard deduction next year. Kevin,

When filing your tax return, you have the option to take the greater of either the standard deduction (11,400 in 2009 for married filing jointly) or itemizing your deductions (where mortgage interest comes into play). If you don’t have enough qualified expenses to itemize, you can claim the standard deduction. Even with my mortgage interest, I almost don’t have enough expenses to make itemizing worthwhile. If legislation is introduced to allow taxpayers to continue to deduct their property taxes without itemizing, I will likely be better off claiming the standard deduction next year.

]]> By: Brad http://frugaldad.com/2010/04/19/pros-and-cons-pre-paying-mortgage/#comment-40589 Brad Sun, 25 Apr 2010 05:30:55 +0000 http://frugaldad.com/?p=5233#comment-40589 Are you children old enough to be involved in the planning for a major trip? If so, let them know what you'd like to do but emphasize that there are major budget restrictions (kids understand that these trips are expensive). Turn it into a giant learning experience for your children. If the kids are on board, they may surprise you with their creative ways they can contribute to the trip and save on a daily basis. Maybe they would even choose to participate in a group sport because they place more value on being able to travel to amazing places. In the meantime, if you have access awesome museums and cultural events, you may be able to really add value by using these learning experiences to make your eventual trip that much more exciting. Are you children old enough to be involved in the planning for a major trip? If so, let them know what you’d like to do but emphasize that there are major budget restrictions (kids understand that these trips are expensive). Turn it into a giant learning experience for your children. If the kids are on board, they may surprise you with their creative ways they can contribute to the trip and save on a daily basis. Maybe they would even choose to participate in a group sport because they place more value on being able to travel to amazing places.

In the meantime, if you have access awesome museums and cultural events, you may be able to really add value by using these learning experiences to make your eventual trip that much more exciting.

]]> By: Alex http://frugaldad.com/2010/04/19/pros-and-cons-pre-paying-mortgage/#comment-40569 Alex Sat, 24 Apr 2010 16:06:54 +0000 http://frugaldad.com/?p=5233#comment-40569 Let me start by saying that I don't own a gun to dispel the survivalist image I'm about to portray, but the nice thing about owning your home is that you own it. Meaning, no one can kick you out. If society goes to hell and the economy collapses (I mean anarchy, not recession), there won't be any banks evicting you as everything unravels. Let me start by saying that I don’t own a gun to dispel the survivalist image I’m about to portray, but the nice thing about owning your home is that you own it. Meaning, no one can kick you out. If society goes to hell and the economy collapses (I mean anarchy, not recession), there won’t be any banks evicting you as everything unravels.

]]> By: Friday Finance Findings for April 23rd http://frugaldad.com/2010/04/19/pros-and-cons-pre-paying-mortgage/#comment-40531 Friday Finance Findings for April 23rd Fri, 23 Apr 2010 13:41:32 +0000 http://frugaldad.com/?p=5233#comment-40531 [...] The Pros and Cons of Pre-Paying a Mortgage – Paying off a debt early is always a good thing, right? Not so fast. There are also some drawbacks to consider and Frugal Dad points out all the pros and cons of pre-paying your mortgage. [...] [...] The Pros and Cons of Pre-Paying a Mortgage – Paying off a debt early is always a good thing, right? Not so fast. There are also some drawbacks to consider and Frugal Dad points out all the pros and cons of pre-paying your mortgage. [...]

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