Growing up, my parents and grandparent taught me that debt was something you wanted to live without. I can still recall my parents telling me ,”Ana, make sure you buy a house because it’s the American Dream , but make sure you pay it off as soon as possible.'” As a mortgage consultant, I was taught the opposite. The idea of paying off your mortgage was simply a dumb thing to do. The concept has always been that as homeowners, the tax benefit is the most important thing to have.
Now as the years progressed, I realize that my parents where right all along. I recently came across a great article that explains why you should pay-off your home. The article was written by Dave Ramsey. Dave Ramsey is one of my favorite financial advisors and author.
According to him there are three reasons why you should pay off your home that people rail against.
- The first is that paying off the house lowers risk, because you won’t be foreclosed on if your house is paid off. It gives you great security.
- The second reason people say not to pay it off is because they say you can make money by borrowing money at a low interest rate on your house and investing it in the stock market. But by the time you adjust for risk and taxes, you don’t come out ahead. I would never borrow on my home to invest.
- The third reason that people say not to pay off your home is that you’ll lose your tax deduction. If you have a $200,000 loan at 5% interest, you’d pay about $10,000 a year in interest, which would give you a $10,000 deduction. If you make $70,000 a year, that deduction is saving you $2,500 in taxes if you’re in a 25% tax bracket. You are sending Countrywide Mortgage $10,000 to keep from sending the government $2,500. That’s stupid. You are better off being debt-free and giving your church $10,000. You’ll save on taxes and do some good with the money.
I could not have said better myself!!
What other reasons do you have for paying off your home? Please post your ideas!
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