Mortgage Versus Not Having a Mortgage.......What do you think?

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Real Estate Agent with Signature Realty & Associates

In these hard economic times, interest rates being low (especially on savings accounts).  Is it smart to pay off your mortgage if you have the money in the bank?  That is my question to the AR community....I am not a financial adviseror and someoneposed this question to me.  Needless to say I was speechless and told them to consult an expert.  However, I am curious....would it not make sense.  I know that many people say they have a tax deduction for the interest, but is that really a savings?  I mean if a person can save $100,000 in interest payments alone, would they ever get that in the form of a tax deduction?  I don't think so.  I would really like to hear the communities thoughts on this.  Thanks for reading my blog!

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Rainmaker
179,680
Catarina Bannier
Compass - Chevy Chase, DC
DC Real Estate The Smart And Fun Way

Nicole -- I'm not a financial advisor, either, but the question does come up quite frequently with move-up buyers or downsizers.  Most of the time, when the clients consult their advisors or investment brokers, they are told to take out a mortgage at a low LTV ratio (30 or 50 percent).  The wisdom is that people should spread their wealth (if they have it) rather than keep it all in the same place, and with the current low interest rates plus tax deductions there have been few investments that will give you a better return.  The cash that the (optional) mortgage frees can either go in a long-term investment or be funds for unforeseeable expenses.

Jul 21, 2010 06:39 AM #1
Rainer
236,015
Susie Roscoe
Signature Realty Associates - Brandon, FL
Real Estate Specialist | Brandon, FL

Nicole, I've heard the same thing as Catarina (above) regarding having a mortgage.  A little debt is actaully a good thing...invest it somewhere else! 

Jul 22, 2010 12:19 AM #2
Rainer
41,526
Tony Cornner
CENTURY 21 Mike D. Bono and Company - Lake Charles, LA
Lake Charles, LA

Nicole, you are wise to refer your clients to their financial advisor as every situation is different.

Jul 22, 2010 04:05 AM #3
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Rainer
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Nicole Kraus

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