I have a mortgage with $115,000 due at 6.3 percent. I can pay it off but do not know if i should. what is the rule of thumb in doing that and what are the tax implications. i am new here and not astute financially. thanks.

How are you financially with everything else? How are you paying this off? Do you have an emergency fund set up? Just curious. You must have discipline to pay this off. If you can pay it off and take your mortgage payment and invest it. I would set it up to automatically be taken out and put into an IRA or ROTH IRA, then I would pay it off immediately.

Remember, now that you won’t have the write off, you will have to pay taxes at the end of the year, so prepare for that. The amount of taxes that you will pay will be a lot less than the interest you were paying on the loan, so you will still be ahead of the game! Great going! I have a mortgage with $115,000 due at 6.3 percent. I can pay it off but do not know if i should. what is the rule of thumb in doing that and what are the tax implications.

You must have some idea of what you’re doing. I’d love to be able to pay off my mortgage (about $140K). If I had that money, I’d pay it off today.

Hi! I do believe the interest on a mortgage can be claimed on taxes. [(Disclaimer: I am not a tax expert. Consult your tax preparer for more details.) I put that in there because I got yelled at once about “false information” yatta yatta.] It also helps build credit. I would keep the mortgage and just pay a little extra off each month.

Especially if you are planning for retirement. Just have it paid off by then is what I’d do. Also maybe put some improvements into the house instead. Just in case you decide to move when you are in retirement. It would be like banking the money. Anyway, those are mainly just my thoughts.

Depending on the terms left in the mortgage, he could be paying twice the mortgage (or more) by the time it’s paid off. Instead, pay off the mortgage and put the money earmarked for payments in a tax-free interest fund. I thought the point of this group is to reduce debt.

I agree paying off debt is important…but if you dont have things in place before that you could be like alot of retirees who have paid for houses with no money..Thats why reverse mortgages are so popular with older folks..And reverse mortgages are a rip off.. You have to be smart in everything you do. Also thats’ why Dave Ramsey doesnt have the house being paid off until step #6. read more here – http://www.daveramsey.com/home/.

Paying OFF your mortgage is always better than taking the tax benefit. All you have to do to see this is figure out how much you are actually writing off at tax time, subtract that from what you’ve paid over the course of the year in mortgage payments and you’ll see that you are paying a bank money just to have some tax benefit.

I would suggest paying it off and if you are concerned about tax benefits, put more money into your 401K or IRA. Or, you could always use that extra money to buy yourself a rental home and increase your income. Just make sure that you can cover mortgage, taxes, and insurance on that next home.

I stick with my original response. If I could get rid of $140K in debt by paying off my mortgage this afternoon, I would do it. Dave Ramsey can afford to give any advice he wishes. He’s worth millions.

Loans Mortgage Taxes

Hi,
I joined the blog after the initial part of this discussion. We have a ARM that matures in May. Can ya explain what my options are for reducing debt? I.e.: refinance with fixed rate (will do if I have to, hate the appraisal process- ill and house needs cleaning and fixing up, would have to hire someone- will do it if necess- but wondered what my other options are). What steps would I need to Take? Thanks for any help.

mortgage loanFYI, when you refinance, the cleanliness of a house is not an issue in the appraisal.. They are taking the location value, structural value into account. They are assuming that you will clean if you sell. So don’t worry about the appraisal.

If you are planning to stay in your home, I would Re-fi to a fixed rate mortgage. I would contact your current lender about your intentions and see if they have a reasonable low fee re-fi option. You may want to check how often your loan will adjust. With the lowering of interest rates by the Fed, it may not be a huge hardship when it does adjust. Is there a reason you went with an adjustable rate to begin with? Are you in a home you can’t afford? If that is the case, you may need to do those repairs needed and get out of the house.

As for the appraisal process, unless you have a huge hole in your roof, sagging gutters or a green swimming pool, I would not be too concerned about the appraisal. If your home is generally in the same condition it was when you purchased, it should appraise out fine. Appraisals are based on comparable home sales in your area, size of your home and upgrades lastly into the equation. I would clean up and fix up for your own satisfaction and piece of mind, not because you are having your house appraised. A lot of times on re-fis, lenders may only do a “drive by” appraisal and may not even come inside your home.

Your house should be suitably clean. Otherwise the appraiser might think you’ve ignored the needed repairs of your house that aren’t visible. As long as it doesn’t look like you’re the proud owner of a garbage dump, you should do just fine. Because housing prices are going way down, there is a possibility of your house appraising for less than you owe. I’m not sure of your situation, but if this is the case, you won’t be able to refinance, without putting up the difference. You can always call your bank and tell them your situation and maybe they will work with you. I have heard of some bank programs helping get people into more traditional loans in cases like these. So I would suggest just calling or meeting someone at your bank.

Also, I am a licensed Realtor and even though I don’t do appraisals, I am familiar with the process. They do not give your house a value based on any repairs that you need to make. Now if your house is falling apart and it’s very noticable, it may have an ill effect on the way they appraise it. But it is usually based on location, square footage, year built and size of lot.

I missed the original question here, but I am a RE Appraiser. And will offer any information I can. Right now the way most mortgage companies I am working with require appraisers to list any necessary repairs at the time of the inspection. Most maintenance items, minor items do not count. If there is damage (rotten wood, peeling paint, missing flooring, etc) these items are supposed to be listed with a cost to cure. From what I have seen, if the cost to cure is under 5% of the total value of the home, no adjustments are made and the mortgage company does not ‘require’ these things to be done – I’m sure each bank/lender has their own method.

The market I am working in is good, still increasing for the most part, but I work with some national companies and know the market is not the same else where. Yes appraisals are based on location/lot, price per square foot, age, amenities, etc. Also most mortgage companies require the comparables to be closed sales with the past 6 months (12 max) and under one mile in proximity (and that changes based on how populated the area is).

I would refinance to a fixed rate if you can. An arm that matures can double or go even higher in most cases. Its either that or have your payment skyrocket up…Can you afford a payment double the amount of what your paying now? Pretty much the only option you have is get a fixed loan or pay off the loan in cash.

which I doubt you can do. My suggestion if you pick a fixed rate and you can afford it is get a 15 year fixed if you can.. Good luck!! MIke

Loans Mortgage