Pay off house or invest the $ ?

For the last several years, we've been unable to get itemized deductions to get anywhere near the standard deduction. With the doubling, its even more unlikely.

Bear in mind, our mortgage payment is only around $550, not including insurance and taxes we pay ourselves. The interest portion is about $350 @ 3.99%. That's not much over $4k a year in interest. Even adding real estate taxes and medical expenses and a few other items, we already get nowhere near the current $12,700 standard deduction.
 
JOhnH said:
Yes.
And I think that is a great thing.

I hear on the news all the time about how people will be losing their mortgage interest deduction. But due to the standard deduction increase, more people will be paying less tax. Especially lower income people (aka mere mortals). And tax filing for those people will be simpler.
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Well, if you're paying $2000/yr in RE tax and you don't have a state income tax, it's terrific. But if you have a $12,000 real estate tax bill and 8% state income tax, not so much.

Also, the new tax bill does away with personal exemptions, so that's on the debit side and hurts a large family. Remains to be seen if the higher std deduction and (slightly) lower marginal rates make up for that..
 
FastEddieB said:
For the last several years, we've been unable to get itemized deductions to get anywhere near the standard deduction. With the doubling, its even more unlikely.

Bear in mind, our mortgage payment is only around $550, not including insurance and taxes we pay ourselves. The interest portion is about $350 @ 3.99%. That's not much over $4k a year in interest. Even adding real estate taxes and medical expenses and a few other items, we already get nowhere near the current $12,700 standard deduction.
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How did you get away with not putting the tax and insurance into escrow?
 
FastEddieB said:
My real world example...

In the mid-1980's, we sold a house in Miami Lakes, FL for $110,000. The family buying gave us $50,000 down and we owner-financed the rest for 15 years.

We split the $50k and put $25k each into a Nuveen and an MFS tax-free municipal bond fund. Each sent us a monthly interest check.

We set up a checking account just for these transactions. Each month the family's mortgage payment and the two interest checks would go in. That only left a small amount for us to add to make the payment on our newer, more expensive home.

Of course, we could have just made a lump-sum $50k principal payment to our new mortgage, but this way we kept the home interest deduction for longer.

Anyway, worked for us.
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Early 80s a 30 year fixed was something like 18%, mid 80s it was still 12%. The early payoff vs. investing was a different equation in those days.
Did you state the private mortgage interest you received as income ? While it's nice to get a mortgage interest deduction, it's net a wash if you have mortgage income to even it out.
 
FastEddieB said:
Not sure. I think it was simply offered as an option which we chose.
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I think it depends on your credit rating, income and how much the loan stresses your finances. If you are low risk they let you deal with it.
 
weilke said:
Did you state the private mortgage interest you received as income ? While it's nice to get a mortgage interest deduction, it's net a wash if you have mortgage income to even it out.
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Yes. Every year I sent the mortgagee a statement showing annual interest and principal paid.

And, yes, I declared the interest earned on Schedule B.

Clearly now, keeping a mortgage to benefit from the interest deduction is no longer a factor for many. For me, the question would be can I safely earn more than 3.99% on the money I could use to pay off my mortgage.

And, yes, the calculus was very different in the 1980's.
 
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paflyer said:
Well, if you're paying $2000/yr in RE tax and you don't have a state income tax, it's terrific. But if you have a $12,000 real estate tax bill and 8% state income tax, not so much.
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I get that, but why should those who live in low tax areas have to subsidize those who do?
 
paflyer said:
How did you get away with not putting the tax and insurance into escrow?
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With the exception of the first house I bought in 1983... from then it has always been an option for me when setting up the loan. However, I have always chosen to go with the impound...
 
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