Pay off our house?

[gmi3804]

for every dollar you pay in interest, your taxes go down by 25-38 cents depending on your tax bracket. put those dollars in the bank, pay the IRS a bit more and you still ave 62-75 cents left in the bank.

it's not a dollar for dollar reduction in taxes

But some people like the Disney Dining Plan.

 

[RivShore]

We paid ours off with funds we had been saving for a new home. When the pandemic hit we worried what if the economy tanks, we get sick or lose our job etc. The only downside is losing the tax break.

And some people are more comfortable with the exact opposite - having a bunch of money in the bank that could be easily used for living expenses/mortgage payments if a job is lost rather than putting it into the house where it can't be used for emergencies.

 

[snowwite]

And some people are more comfortable with the exact opposite - having a bunch of money in the bank that could be easily used for living expenses/mortgage payments if a job is lost rather than putting it into the house where it can't be used for emergencies.

We were worried about not being able to pay the mortgage and winding up homeless. It’s a huge relief having it paid and we have already saved about half again.

 

[Starport Seven-Five]

for every dollar you pay in interest, your taxes go down by 25-38 cents depending on your tax bracket. put those dollars in the bank, pay the IRS a bit more and you still ave 62-75 cents left in the bank.

it's not a dollar for dollar reduction in taxes

Very few see their taxes go down even 1 cent (compared to the standard deduction) after the recent tax changes.

 

[robinb]

Pay the house off. People assume that all investments will make more, perhaps, perhaps not. We paid ours off three years ago and it gives an amazing sense of freedom. Also....unless OP has a VERY large mortgage you can no longer deduct mortgage interest...that went away with the substantial rise in the standard deduction.

I agree. Pay off the house. We took a car loan a few years ago even though we had money to pay for the car in cash. My DH thought that we would make more in investing the money than the interest we were paying. Hello 2020! Yeah. Bad move. Luckily it wasn't really a big deal since the loan wasn't that big.

We have everything paid off moving into retirement and it's a great feeling.

 

[havaneselover]

I agree. Pay off the house. We took a car loan a few years ago even though we had money to pay for the car in cash. My DH thought that we would make more in investing the money than the interest we were paying. Hello 2020! Yeah. Bad move. Luckily it wasn't really a big deal since the loan wasn't that big.

We have everything paid off moving into retirement and it's a great feeling.

Not really apples-to-apples when the risk-free rate (think a t-bill) is way higher than a lot of people's mortgage rates. I've got enough to pay off my mortgage. Right now my interest is about $3600 per year (no tax deduction). But if I invest it in t-bills I can currently make about $7k/ year after taxes. The money is still there if I change my mind in 6 months. But I'm ahead $300/month in the meantime.

Still not saying this is the only way to think about this.

 

[tzolkin]

Very few see their taxes go down even 1 cent (compared to the standard deduction) after the recent tax changes.

I always hear people mention how it's great to have a mortgage because it's a tax write off, but I would bet the majority who are saying this are taking the standard deduction and just don't know the difference. To me, it's kind of like how some people will advise others not to work any overtime because "you will wind up paying more in taxes than what you make" because they have heard about tax brackets, but don't really understand how it works.

 

[gmi3804]

I always hear people mention how it's great to have a mortgage because it's a tax write off, but I would bet the majority who are saying this are taking the standard deduction and just don't know the difference. To me, it's kind of like how some people will advise others not to work any overtime because "you will wind up paying more in taxes than what you make" because they have heard about tax brackets, but don't really understand how it works.

Right. As if they’re going to be paying the higher rate on the WHOLE amount.

Some people are just destined to stay down.

 

[tzolkin]

Right. As if they’re going to be paying the higher rate on the WHOLE amount.

Yes, this is exactly what I was referring to. I cannot even begin to count how many times I have heard comments relating to this. "Better be careful or you might get bumped up to the next tax bracket"-- people worried that if they work extra or get a raise that it may be detrimental to their finances.

(I do understand that there are certain credits and deductions that you may no longer qualify for at a higher income, but I'm specifically referencing people who believe that if you make $100 over the cap for the 12% bracket that you will pay 22% on your entire income and actually lose money by working the extra hours.)

 

[jimmymc]

With a 3% interest rate, keep making minimum payments on your home and max out your IRA and 401k. That's a great interest rate.

 

[Starport Seven-Five]

I always hear people mention how it's great to have a mortgage because it's a tax write off, but I would bet the majority who are saying this are taking the standard deduction and just don't know the difference.

A lot of people just repeat what they've heard from friends or financial "experts." It doesn't help when a lot of those "experts" haven't updated talking points for decades (looking at you, Mr Ramsey).

 

[goofytinkerbell]

for every dollar you pay in interest, your taxes go down by 25-38 cents depending on your tax bracket. put those dollars in the bank, pay the IRS a bit more and you still ave 62-75 cents left in the bank.

it's not a dollar for dollar reduction in taxes

It amazes me that you get a tax break for interest. Canada doesn't have that!

 

[CAPSLOCK]

It's very interesting for sure...

 

[gmi3804]

It amazes me that you get a tax break for interest. Canada doesn't have that!

This country rewards and encourages those with money.

 

[georgina]

This country rewards and encourages those with money.

Well except for those of us with high property taxes that can’t all be deducted because of the cap.

 

[havaneselover]

This country rewards and encourages those with money.

Be careful because we can't talk about politics.

 

[tvguy]

It amazes me that you get a tax break for interest. Canada doesn't have that!

As my cousins in Canada say..."gotta pay for that free health care some how"

 

[goofytinkerbell]

As my cousins in Canada say..."gotta pay for that free health care some how"

Haha yup, gotta pay for that broken healthcare system!

We pay loads for taxes, but there's something to be said for being able to get checked out without having to take out a loan. Actually getting that done can be really difficult, but if it's a proper emergency you get pushed to the front of the line

 

[tvguy]

Haha yup, gotta pay for that broken healthcare system!

We pay loads for taxes, but there's something to be said for being able to get checked out without having to take out a loan. Actually getting that done can be really difficult, but if it's a proper emergency you get pushed to the front of the line

I hear getting a non-emergency appointment with a specialist can be tough. I made the mistake of complaining to one of my cousins in Ottawa that I had to wait 4 months from referral date to see a Cardiologist. My cousins wait was 13 months.

 

[goofytinkerbell]

I hear getting a non-emergency appointment with a specialist can be tough. I made the mistake of complaining to one of my cousins in Ottawa that I had to wait 4 months from referral date to see a Cardiologist. My cousins wait was 13 months.

YES! I won't get into it here, but my doctor just dropped a bunch of patients (me included) due to having too many. The Canadian system is a mess, but I don't think it's just a "here" problem.