Quote:
Originally Posted by Seminole
Is the only reason you would think to slow down on the mortgage payment is for the tax benefit? Lets try to see what the benefit is.
I'm going to assume some rough numbers just for an example. Lets say you and your wife file as married filing joint and your taxable income falls in the 15% bracket ($16,751 - $68,000). And even though that $10,000 extra interest you'll pay will not be evenly spread out over the extra 5 years (8 years if slow down payments - 3 years at current pace), lets assume it is. So if you DON'T pay off your mortgage faster then each year you'll have a itemized mortgage interest deduction of about $2,000. Lets pretend that before this and net of all your personal exemptions and the rest of your itemized deduction your taxable income is $65,000. So the mortgage deduction would reduce your taxable income to $63,000. That means your tax liability will be $8,612 using 2010 tables. If you don't take that deduction then your tax liability will be $8,912. So you are only saving $300 per year by extending the mortgage. Over those 5 extra years you'll only have a total savings in taxes of $1,500, but to get that you had to incur an extra $10,000 in interest. So you ended up -$8,500.
I would pay off the mortgage and not worry about the interest deduction since it is so minimal.
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The only thing your off on is we make above $68k combined. Not a hell of a lot more but also not over $100k, somewhere inbetween. Oh and our agent ran the numbers last year and we filed married filing seperate.
Anyways, I was kind of assuming that outcome. We've been very aggressive as it is and we're almost to the point that we're paying mostly towards principle.
There are also a few other issues. The wife took a new job and a pay cut for the year. Which then she'll get a pay increase next year above her salary this year, and then another and another for the next 4 years. Fairly decent jumps. I on the other hand dropped $20k this past year in pay, which royally blew haha. Which was mainly the reason we thought of dragging out our motgage slightly as well as the tax write off. We just weren't sure which made more sense. We can continue fairly easily at our payments even with our salary setbacks we just may have to be a little lean on personal expenses and savings. We could also just play the mortgage payment by ear each month depending on what comes up.
