Posted by Mark (SDCA) on January 07, 2003 at 11:51:43:
Yes. The analysis is comparing the mortgage rate to what you could earn elsewhere. Right now 15 year mortgages are in the 5.25 range. Not something you want to pay off (except for piece of mind reasons.)
Mark
A mortgage question…personal residence… - Posted by Mike_NY
Posted by Mike_NY on January 07, 2003 at 09:25:06:
If someone had cash…fairly large amounts…lets say enough to own there HOME free and clear…should they do it.
I was speaking to a friend who owns his own business and does well for himself. He had asked my opinion on the matter.
Now I realize that your interest is tax deductable on your mortgage, but in reality isn’t it somewhere around .30 cents on the dollar?
I’ve also heard some argument that it depends on where your money would be better spent. In other word a 7% loan and getting a 10% return somewhere else.
I’m not too sure about that one, I think I read something from Ron Starr. I maybe confused.
I just keep hearing people with 30 year mortgages (with large monthly payments) talk about the tax deductions. Then they throw all their money into the markets. Or God knows what else they do with the extra income. I would like to back up what I feel is the smart thing to do.
I would rather own a home free and clear. (piece of mind)…increase my monthly cash flow and then invest the cash flow.
Why sit on cash and pay a mortgage???
Thanks for the input in advance…
Mike
Re: A mortgage question…personal residence… - Posted by Justin
Posted by Justin on January 07, 2003 at 23:17:49:
It really comes down to your goals and investment strategy. If you would normally just sit on the money in the bank, then yes, you’re probably better off putting it into your residence and owning it free and clear.
Personally, as a real estate (and note) investor, I know I can easily earn a minimum return of 20% with the cash rather than “parking” it in my residence – especially with rates where they are now.
Just depends on how aggressive you are with your investment strategy. I recall a time not long ago when people were mortgaging to the hilt and pouring it into the stock market – I have to wonder where these people are now. That’s a bit TOO aggressive for my taste, particularly with the lack of control!
Anyway, just my $0.02…
Kind regards,
Justin