paying off mortgage. new tax law.

[scaredyclassic]

My numbers are way off. It’s 1100 and 650 p & I.

And I’m a little off the deep end calculating I’d need a 12 perc return when I’m basically counting not gains but getting back principal I’d have paid lump sum over many years,

OTOH

I fear this 200k could get spent quickly on home improvements.

Even a clean 3.375 perc is better than a new kitchen.

The money has to go somewhere. What’re my safer options. I can’t leave it in a money mkt fund.

Cali muni bonds?

I wouldn’t have thought interest rates would still be this low n 2018. It’s almost like I’m capitulating.

[FlyerInHi]

As Harvey pointed out, you can’t include the principal portion.

I would buy a rental property if I were you. You can find something that cash flows nicely in riverside county. High demand for rentals right now.
But sure, a good recession may cause your tenants to lose their jobs.

Or buy your kids condos where they work or go to school.

Will you enjoy the new kitchen or home improvements?

[henrysd]

Paying off mortgage actually makes some sense to you. Your mortgage interest is only $13K a year, you are only allowed $10K on SALT and property tax to deduct. If you don’t have large charitable donation and you itemize, you have only $23K deduction, less desirable than taking simple standard deduction of $24K. The $10K SALT limit won’t increase for inflation, but standard deduction adjusts for inflation(chain based). Maybe next year it becomes 25K, a few years later you will find it is a lot bigger than itemizing.

In another language your mortgage interest is basically no longer deductible in federal tax, even though still deductible in CA state tax.

[moneymaker]

A lot of variables to consider, your age, your risk tolerance, kids (college fund), desires (possibly wifes desires here too), where is the money coming from? In my case I have less to pay off at a lower rate, however I can still deduct and not get hit by caps. Personally I would pay it off if the money is coming out of the stock market, but hey I’ve been wrong many times before so I think you should consult the wife. If the money is sitting in a money market account then I would say it is probably a wash and don’t lose any sleep over it. Max out 401k/IRA/college fund and then count your blessings.
You should have already refi’d into a 15 year to get the best rate and deduction, if you didn’t then that’s one more thing you can kick yourself for.

[moneymaker]

Isn’t capital gains on the interest from the 370k only 15%? On the other hand if (when) interest rates rise the money market (bonds) is probably not a good idea. Buy some gold and make sure you have an alarm system!

[Ribbles]

[quote=flu]there is a sense of relief not have a large debt load hanging over your head.[/quote]Agreed. If I had the wherewithal to pay off my primary, in this market, I would do that before buying a rental in the inland empire (buying a rental in flyover country is another story). Yes, you have the property tax responsibility, but you’ll have that anyway. If you had to, you could rent out a room to cover it. Or rent the whole house out and get an apartment. We specifically bought our house because of the separate casita, currently rented to the inlaws.

In case I suddenly kick the bucket, I made my wife promise she will use the life insurance money to pay off the mortgage.

[Ribbles]

[quote=FlyerInHi]You can find something that cash flows nicely in riverside county. High demand for rentals right now.[/quote]I’ve considered buying a couple rolling acres in Temecula, nicely landscape it, put in two restroom/dressing room buildings (bride and groom), and then undercut the wineries for weddings by half. Maybe wifey could become a photographer.

[Coronita]

[quote=moneymaker]A lot of variables to consider, your age, your risk tolerance, kids (college fund), desires (possibly wifes desires here too), where is the money coming from? In my case I have less to pay off at a lower rate, however I can still deduct and not get hit by caps. Personally I would pay it off if the money is coming out of the stock market, but hey I’ve been wrong many times before so I think you should consult the wife. If the money is sitting in a money market account then I would say it is probably a wash and don’t lose any sleep over it. Max out 401k/IRA/college fund and then count your blessings.
You should have already refi’d into a 15 year to get the best rate and deduction, if you didn’t then that’s one more thing you can kick yourself for.[/quote]

I think for those of you that can, you should take advantage of the tax free distribution of the 529 college savings plan, but working with a trusted relative that sends their kids to a private school, in which you pay for their tuition and they gift you back the cost of the tuition, so you can get all of your investment returns in the 529 plan tax free.

[hmc]

I may miss something, isn’t mortgage interest for up to 750k is (income) tax deductable?

AMT kills property tax deduction but not mortgage interest deduction unless it’s changed in new tax reform?

[Escoguy]

It doesn’t have to be all or nothing, you can pay down 50% of the mortgage and get a modification to keep the same term. Might cost $500 but you then get a 50% lower payment.

With the remainder you can invest in a combination of Vanguard Muni and closed end muni bond funds to make 3-5% tax free.

The monthly savings can the be put into two index funds 50% muni bonds and 50% total stock market.

I personally like: VPGDX Vanguard Managed Payout Fund Investor Shares

Later if you decide you want to pay it all off, you can or you can continue with stocks or used some of the funds to buy more property.

We paid off our first home about 5 years ago. It allowed us to rent it out and buy a bigger house (short sale) in 2013. The intersting thing was, the rent from the first home covered the mortgage on the new one. So we kept doing this three more times to get to 6 properties, of which 2 are free and clear. We owe about 1.5M on properties worth 4.2M now and the cash flow is good enough so work is optional.

I continue to work but to buy the things I wouldn’t be comfortable selling assets to buy like vacations, new cars, water treatments, major landscape projects, additional solar panels etc.

So paying off a mortgage can be a great step to financial freedom, but don’t sweat it too much as there are many options.

[scaredyclassic]

i see that now. my mortgage co. has online calculator to play with new payoff scenarios and its easy to adjust payments.

cant seem to commit.

if i stayed here for another 25 years i think id rather keep the mortgage,as an inflation hedge.

if im leaving within 10 years, rather pay it off.

although irdational, partial payoff feels more futile, less gratifying.

temecula prob uninhabitable due to global warming by 2043

[Coronita]

This past week is one of the reasons why I chose to pay off the mortgage off of most of my properties. When panic hits the streets, and markets tank, and my 401k is off $80k+ from peak in a little less than 2 weeks….

No matter what, i still have a roof over my head with minimal strings attached to a bank.

In hindsight, it would have been good if I paid off that $39k balance on the last rental property too. Because that amount (after taxes) went out the door in two weeks. lol.

Market correction?
Bring it on.

[sellshomes]

For me paying off the mortgage is more of a peace of mind thing.

Not a lot of posts lately on what people are thinking the next year or 2 will bring to local housing markets, I’d love peoples opinions.

Lately talking to lotsa people that are tempted to cash out. But than where to move?? Market still has plenty of demand as I see it.

[scaredyclassic]

I think im ready to move to hawaii.

[carlsbadworker]

[quote=scaredyclassic]I think im ready to move to hawaii.[/quote]

So missile from Kim Jong-un is not on your scaredy list?

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