Jack M. Guttentag The Mortgage Professor

FinanceGuy - Tuesday, June 2, 2009, 8:38AM ET  Report Abuse

• Overall: 5/5

I agree with the previous post. The author is a profound source of wisdom with regard to real estate and associated financing. Many of the negative comments are off the topic. Paying down your mortgage, especially if you plan to live in your own for any substantial length of time, is almost always a great deal. But, as the author point out, it is a fabulous deal as of this writing. My motto: My Love, Not Loans (I'm a child of the 60's.)

Martha - Tuesday, June 2, 2009, 8:21AM ET  Report Abuse

• Overall: 4/5

I must say, many of the comments reflect a level of cluelessness. I have to wonder whether the most venomous posters even own a house. I see two points in the article: 1) From the first paragraph, any additional principal you pay each month reduces your interest every month thereafter by 1/12 x interest rate x extra principal. Even an extra $5/month early in the loan can start reducing the total number of monthly payments amazingly quickly. 2) If you have some cash lying around earning essentially 0% interest and a refi on a reduced principal balance works for you, do it! If you stick with 30-year fixed, your payments will drop dramatically and you have the option to apply #1. Or, you can just use the extra monthly cash flow from the reduced payment to invest elsewhere. The mortgage interest deduction is over-rated for the vast majority of homeowners. Even in the best case, it is only a small offset against BIG EXPENSES. If you can avoid the expenses, you are almost always better off. Plus, the standard deduction has gotten so high that many folks (like me) can't top the threshold. The mistake I think the venomous posters make is assuming that the American people ARE what we see in the press. In my experience, that's not so. The press locks on a small detail and plays it until the next detail pops onto their radar. Each person's situation is different and the only detail that counts is your own unique situation. Try to understand the big picture by reading broadly and thinking about what you read. Then act in a manner consistent with your own best interests.

Yahoo! Finance User - Tuesday, June 2, 2009, 5:46AM ET  Report Abuse

• Overall: 1/5

This man is an idiot.........enough of this so called advice, its all crap...

Disco Stu - Monday, June 1, 2009, 10:53PM ET  Report Abuse

• Overall: 2/5

It's like part of an article. He discusses a couple situations when mortgage repayment might make sense, but barely touches on the complete issue, which must include tax implications. The answer can change depending on whether you are getting a deduction for the interest, or whether you are foregoing investment in tax-advantaged accounts to pay the mortgage down.

jeff - Monday, June 1, 2009, 9:07PM ET  Report Abuse

• Overall: 1/5

The author is a complete moron Please try harder or stop altogether

Yahoo! Finance User - Monday, June 1, 2009, 6:42PM ET  Report Abuse

• Overall: 2/5

We had voted for Obama to save US nation not Wall Street; to raise the wealth of noble American soul not the Europeans'; to revalue the USD not Euro nor Gold; to make the US, No.1 innovator country not UK nor Germany. What a big disappontment are you Obama, for all Americans and rest of the world except those including Wall Street, and European old dynasties like Habsburgs?

Wesley - Monday, June 1, 2009, 4:40PM ET  Report Abuse

• Overall: 4/5

Not sure why people are critising the repayment of debt, guess that is why we are in this mess. Debt=risk and this risk has a lien on the house you live in. The risks of inflation, prepayment risk etc. are the exact same for every other investment, there are tax implications so when looking at your entire prtfolio paying down debt has to be considered as part of the overall portfolio.

Yahoo! Finance User - Monday, June 1, 2009, 4:39PM ET  Report Abuse

• Overall: 3/5

Article would have been better if tax implications had been discussed. Someone who is close to having mortgatge interest deduction having no tax beneift would probably do well to start paying off if they have extra income laying around. Investing it in a money market or CD account is wasteful. If you plan on staying in your home and can eliminate debt at a known cost, it really is a no brainer to put a little extra each month or at the end of the year toward paying off the mortgage early. Speaking from my own experience of refinancing 3 different times, are caluclated cost savings on interest payments and reduced mortg. interest rate will be upwards of $60K in savings.

Yahoo! Finance User - Monday, June 1, 2009, 4:35PM ET  Report Abuse

• Overall: 4/5

No reason your real estate cannot be both a home and an investment. Even last year, our retirement real estate, in our location, increased in value about 3%. The three year average increase for 2004-2007 was 15% per year. It averaged 10% per year since 1990. For 2009, we have already been offered an additional 10% above the 2008 value. Location, location, location. No, this is in the midwest, not on any coast. Sorry to hear of so many losing value in their homes, but has not and will not happen to us.

Al - Monday, June 1, 2009, 3:53PM ET  Report Abuse

• Overall: 1/5

This advice is simplistic to the point of irrelevance. The first problem with this kind of advice is that your house is first and foremost your home. It is not an investment vehicle. This is important because you always need a place to live and often close to your job. This means that your decisions to stay or leave your house are likely to conflict with your decisions if it was purely an investment. Second, you need to consider whether the dollar is experiencing inflation or deflation. Sharp inflation AFTER you locked in your rate is your friend and you should drag your feet in paying off your mortgage as much as possible. Deflation is your enemy because it means that each dollar will be harder and harder to come by and the bank will be getting more value for each mortgage payment. So if the dollar is experiencing low inflation or is even deflationary, then you should consider investing in early mortgage repayment IF you will be staying with that house for a while.

StuartB - Monday, June 1, 2009, 3:08PM ET  Report Abuse

• Overall: 4/5

A wise friend once asked me: "Why would you spend a $1 to save 25 cents?" Meaning, "Why would you spend $1 in interest expense to save 25 cents on your taxes?" While you may be reducing the tax benefit by paying extra on your mortgage, if you were to instead to buy taxable bonds, the interest would be taxable. So either way (lower mortage interest deduction or higher income) you pay more taxes. Also, the standard deduction for married filing jointed is quite high now, so you really need to look at the MARGINAL benefit you receive on your mortgage interest deduction. If you barely have enough to itemize, then its a no-brainer. Also, people need to de-couple the asset (your home) from the liability (the mortgage). Regardless of what the value of the asset does, you are obligated the pay back the liability. To think otherwise would reflect poorly on your character.

BryanH - Monday, June 1, 2009, 2:36PM ET  Report Abuse

• Overall: 5/5

The fact that this excellent article is rated so low just proves how important this advice is. Paying down debt is the safest and often the highest yield one can make. However, the comments here seem to suggest, very few people seem to understand this.

Yahoo! Finance User - Monday, June 1, 2009, 2:18PM ET  Report Abuse

• Overall: 4/5

A quick comment coming from a CPA with a MSF.... Overall, I agree with him however there are factors that would affect the actual return like the loss of tax deductions. But in defense of this strategy, you don't have to PAY taxes on the implicit gains either, and unless the return you get elsewhere is LT, the tax savings and costs would equal out. Another factor, as someone else mentioned is inlfation (cheap $ to pay it off in the future), but don't forget, you can take the money you used to pay off the mortgage back out in a HELOC. You can take out the money you paid in, and invest it how you might have if you didn't pay it to the mortgage. So just guarantee yourself the return now while it still makes sense and change your mind later. But in the end, you can't value not having a mortgage hanging over your head and being debt free when you retire!

Will - Monday, June 1, 2009, 2:06PM ET  Report Abuse

• Overall: 1/5

LOL, this is rediculous. FACT: you will never see a dime of the money "invested" into your house until the day you sell it. This is the same sales pitch that convinced many people into unafordable loans because "they would be able to re-fi before the rate increased." Get a clue people.

Yahoo! Finance User - Monday, June 1, 2009, 2:05PM ET  Report Abuse

• Overall: 1/5

Why pay your debt when THE OBAMA WILL FORGIVE IT!!!! The new protocol is that I buy my Excalade, and you bail me out. Long Live Obama!!

goldensach - Monday, June 1, 2009, 1:55PM ET  Report Abuse

• Overall: 5/5

It's least it is usable advice, he's not saying pay off your mortgage. Not like he's Dave Ramsey calling on the lord to give you the strength to pay off all your mortgage debt ASAP before the mortgage bogyman nabs your home. All while Ramsey praises some arrogant Hawaiian Japanese real-estate scam artist calling you cheap for not playing the game the way he makes it up in his best selling mini-novels. Talk about hypocritical.

Yahoo! Finance User - Monday, June 1, 2009, 1:32PM ET  Report Abuse

• Overall: 4/5

This is actually a very good article. I am shocked to see SO many dumb comments. People think before you write!

Yahoo! Finance User - Monday, June 1, 2009, 12:55PM ET  Report Abuse

• Overall: 1/5

To put more of your money in your house is to believe that housing prices have bottomed. I think that money could be invested in commodities like natural gas and silver with much better returns. 6% sounds good in this environment, unless its in an asset thats losing value, like houses.

Nick Name - Monday, June 1, 2009, 12:50PM ET  Report Abuse

• Overall: 1/5

While that may be true TODAY. Its only a matter of time before massive government spending and the government inflating the money supply to pay the bills ramps up inflation to levels never before seen in the US. Its better to pay back mortgages in future years with cheap dollars. The key is having a fixed rate mortgage. If you payment is $1000/month, it wont rise even if inflation reduces the real value of theat $1000 by 50% or more over the next few years. Of course this is long term thinking and not in line with people who think long term planning is next year. Its increasingly apparent that other countries will not continue to buy US government bonds to finance US deficits. China cutting back is only the tip of the iceberg. If government spending/borrowing was under control and improving then Jack Spratt would be right. But it isnt and shows no signs that it will be any time soon.

Yahoo! Finance User - Monday, June 1, 2009, 12:45PM ET  Report Abuse

• Overall: 1/5

It's hard not being an expert... I guess I wrongly assumed that when paying down a mortgage balance with a rate of 6.125, the "yield" of my investment would actually be less than 6.125-- because mortgage interest is tax deductible. That is to say, if you don't prepay your mortgage, some of that 6.125% interest is actually coming back to you in the form of a tax deduction, so the benefit you achieve by not having to pay the interest is less than 6.125%. I'm not arguing you shouldn't pay off your mortgage. In fact, I'd say you should definitely pay it off while maintaining an adequate reserve of liquidity. The "yield" from paying off your mortgage is guaranteed for life. I hope that when this expert cracks out his $20 calculator for his clients that he considers the tax implications of his advice.

Yahoo! Finance User - Monday, June 1, 2009, 12:01PM ET  Report Abuse

• Overall: 4/5

Good article Jack. I've purcahsed Robert Kiyosaki's products and will be a millionaire very soon... just an FYI.

Valhalla360 - Monday, June 1, 2009, 10:51AM ET  Report Abuse

• Overall: 2/5

Wait, I thought you said we should we should stop paying so the govt can bail us out. Why pay a loan you agreed to pay, even if it is the moral thing to do? The big flaw in your analysis is closing costs and how long yo plan to to stay in the house. If you are close to retirement and will be moving in a few years, closing costs can easily eat up the savings if you refinance.

MarkT - Monday, June 1, 2009, 9:15AM ET  Report Abuse

• Overall: 3/5

Jack, paying down the mortgage balance is not a risk-free proposition. Remember that a mortgage in a non-recourse state basically has a built-in put on the house. It might be the case if the house is worth twice as much as you owe, but not necessarily. Also, the mortgage gives you optionality. If treasuries go back up to 12%, a buyer might be better served by saving money in a CD at 2.5% today and then reinvesting it at 10% in a few years rather than paying down a loan and saving 5.5% interest you'd pay (assuming you've already refinanced.)

Stephen M - Monday, June 1, 2009, 8:26AM ET  Report Abuse

• Overall: 3/5

Yes Jack should have mentioned the refi program that is available...by name DU Refi Plus...But anybody who is in the mortgage industry now knows that this program is NOT the magic carpet to salvation...The program, like most gov't concocted programs is lacking in many way...I only point this out becasue a prior comment intimated that it was easy. just my .02

Yahoo! Finance User - Sunday, May 31, 2009, 12:46AM ET  Report Abuse

• Overall: 4/5

I think this program is touted enough in the media, and that the author is concerned primarily with speaking to those without the privileged position of being an FHA borrower. Like myself, many chose a traditional loan with its traditional values and are now over their heads far more than the 105%, at which Obama's plan allows for a refinance. Those like me have been ignored in just about every way by the govt, and so the author helps us to better evaluate a paydown because this is about the only way we have to feel any degree of relief. BTW, for those without cash, this won't even help. Anyone who purchased between '05 and '07 using a traditional fixed rate, and doesn't have $80,000 extra in cash, is forgotten. Without a paydown, there is no refinance and there is no chance of removing pmi.

TED - Saturday, May 30, 2009, 12:27AM ET  Report Abuse

• Overall: 1/5

Once again, Jack misses the main point by a country mile. Fannie and Freddie's new Home Affordability Refinance Program (recently touted at the White House by Obama and available for over a month) allows many individuals to refinance regardless of their equity without adding PMI if their current mortgage doesn't have it. This is the exact scenario cited in his first example. It is remarkable that a so called "expert" would make no mention of this program, which easily deserves it's own column, if his intent is to provide useful, topical information. I guess Jack would rather play with his calculator than learn about current innovative and under publicized mortgage programs. At least he is consistent.....consistently off target and ill informed!