My husband and I are retired and living comfortably. We owe 87,000.00 on our home. My husband wants to pay off our house but I think we need the tax deduction. What do you suggest?
Well, have you figured out just how valuable that tax deduction is? If you are in the lowest tax bracket, and you owe this small amount, and have a mortgage rate of under 5 percent, you have a very low interest deduction. Check the statement that your lender sent to you at year-end. Your real estate taxes are likely a much larger deduction. And you’ll still be paying that bill every year!
(Of course, if you have a high interest rate mortgage, over 5 percent, then you might want to pay it down, because it costs more than you can earn on money in savings.)
But there is another reason you might hesitate to pay off your mortgage balance. It could take a large percentage of your cash, your liquid savings. Would you have enough cash left for an emergency if you pay off your mortgage? That’s something to consider too.
If you’re planning to stay in the house for a long time, one positive is to pay off your mortgage so that you can easily tap your home equity for a reverse mortgage if you need help with living expenses. It will give you tax-free cash on a monthly basis to help pay any retirement costs.
So, this is a complex decision. Consider all aspects.