Is it better to try and pay off a mortgage quicker ieg biweekly payments, or not to and take the tax benefits?
Answer:
Anyone who touts the tax benefits is foolish. Losing the reduction in taxes compared to the much larger payment in interest is a no-brainer. Stop paying the interest and use the money for something useful.
One of the easiest ways to pay off a mortgage quickly is by making payments every 2 weeks..you can arrange to do this by contacting your loan officer who handled the transaction. When I say make payments every 2 weeks, I don't mean make 2 full payments but divide you mortage in half. It pays more towards you're principle..good luck!
Remember that the extra payments go to principal so the amount of interest you pay, and your tax benefit, is essentially unchanged in the early years.
It's a huge benefit to pay it off early. Would you rather pay $100 in interest and get $30 back in a tax refund or not pay the $100 in interest at all?
biweekly payments do you little good in paying off a mortgage early. if the bank does not credit you but one payment a month.
you would do better to mak additional "principal only" payments on the loan. that way you reduce the amount that you owe faster.
If you can pay it off early, I'd do it. Not having a mortgage payment every month would far out-weigh the tax benefits!
MUCH better to make the payments in a bi-weekly fashion. Lets look at it this way, if you make even an additional $20 payment each month you can save yourself $15,000 over a standard 30 year mortgage. I don't consider sending 90% of my money to interest payments to be a tax break (i.e writing off the interest payments) because your just wasting your cash. Read up on mortgages and you will find better ways to write off the mortgage without having to send your money to interest payments.
You stil get the tax payments on 50 of your 52 payments. Those two extra go STRAIGHT to the principal, and pay down your mortgage. Remember, when you deduct, say, 1000 worth of interest, you dont get 1000 back--- you get the amount you would have paid in income taxes back-- like 100.
So would you rather owe 1000 less on your house, or get 100 worth of income tax back? You're still far ahead by paying extra.
But also remember that credit cards and such cost a fortune, and it makes more financial sense, sometimes, to pay THOSE things off, or cars with higher interest, then a tax-deductable low interest mortgage.
On a 30 year mortgage, one extra payment per year cuts 7 years off the mortgage. Something to think about.
I agree with others that say the tax benefit is foolish. While it is a benefit, basically every dollar you spend in interest only 30cents savings in taxes, so it still cost you 70 cents.
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