Jack M. Guttentag The Mortgage Professor

Yahoo! Finance User - Sunday, May 13, 2007, 8:49AM ET  Report Abuse

• Overall: 5/5

We are retired and we won't do the Schedule A deduction next year as it will be below the standard deduction. My question: Is it better to pay off the house mortgage rather than leave the money in investments where it may be eaten up by future nursing home expenses for my older spouse with dementia. He has Medicare A & B and health insurance also.

Builder - Thursday, May 10, 2007, 12:14PM ET  Report Abuse

• Overall: 4/5

It is a very good article. But I don't agree with those calculation. If you invest your money instead of paying off your house, you need put a lot time on those investment. Should we consider those time and effort on the calculation? Also about the mortgage tax deduction, in my understaning, you only can deduct the amount more than the standard deduction. In some case, you mortgage interest less than the standard deduction, so you can not get any tax benefit from mortgage.

Yahoo! Finance User - Monday, May 7, 2007, 8:52AM ET  Report Abuse

• Overall: 4/5

One issue not being mentioned is the difference between buying a home to live in or buying a home to invest in as a rental/income producing asset. If for any reason you need to sell your assets in case of an emergency, selling the home that you live in (that you paid off in full) is not a viable option. However, if this 180K home is an investment property, you could possibly sell the home considering you have a different place to live. Having that much cash tied into your home instead of taking a mortgage is riskier than taking all that cash an making a few smart investments.

Yahoo! Finance User - Thursday, May 3, 2007, 6:11PM ET  Report Abuse

• Overall: 5/5

I don't agree with liquidating ALL assets to pay off a mortgage. However, if you're still on track with retirement savings and if you have a "safety net" in some sort of savings account, pay the thing off!!

Yahoo! Finance User - Thursday, May 3, 2007, 4:53PM ET  Report Abuse

• Overall: 5/5

Good article.

Yahoo! Finance User - Thursday, May 3, 2007, 2:51PM ET  Report Abuse

• Overall: 3/5

This article is pretty good, and helps explain to people why they should never pay off their home morgage early...but he should have gone further. The opportunity cost of having all your money invested in your house, rather than having it diversified in LIQUID assets is enormous. Especially since your home appreciates regardless of the amount of equity you own (whether you own 10 percent of the house or 100%, you still make the same amount as it appreciates. Why wouldn't you invest as SMALL amount as you can to make a certain amount, thus greatly increasing your % return?). This is called leverage, and it is key in real estate. This is also why the richest 1% of americans utilize so much debt--especially recently at these low rates. Debt is a finacial TOOL if used correctly that can make you rich a lot faster than if you didnt use it. Money makes money...Plus, Anyone that says that it is riskier to have your money in liquid assets such 401k/retirement plans, mutual funds, stocks, bonds, and other diversified investments rather than all in your house is wrong and misguided. Most people can hire/find a finiacial manager that should be able to generate long term returns that are way higher then the 4-5% after tax interest you pay on your home these days. Ask most multimillionaires and you will find out that they can pay off their homes if they want to, but don't. They use that debt to their advantage and to generate more wealth/security. What happens if someone in your family or you gets a terrible, expensive illness? chemo maybe? Or loses his/her job? Or for whatever reason, needs money (ie emergency fund)? It happens all the time, and If your money is all in your house cause you paid off that 30 year morgage sooner then you needed to because you THOUGHT you'd have the peace of mind knowing you didnt have to pay a monthy check to the bank, the bank will never let you refinance and take that money back out in an emergency or when you lose your job, because your home loan is a loan against your income (not your house). You can't sell just a window or a door of your house...You will be forced to SELL your entire beloved house at whatever market rates are at the time. Does that sound like peace of mind or low risk? No. If your money is liquid, however, you have many more options in an emergency/life crisis. Plus, you have the opportunity to take advantage of compound interest over multiple decades. The realtity is, you must always consider the opportunity cost in any economic decision. For all the naysayers out there that hate to hear me/others say this because they paid off their morgage--i'm sorry(and no im not paid by the banking industry). I suggest reading the yahoo finance article from a month or so ago entitled "the Surprising Borrowing Habits of the Rich", (which can be read at http://finance.yahoo.com/loans/article/102370/the_surprising_borrowing_habits_of_the_rich ) if you aren't convinced. If you let depression era scare tactics that don't apply to today scare you into being too conservative, you will mis out on the opportunities that make people rich. Sure, a house might be a good way to save if you can't stop yourself from spending...but its NOT less risky then liquid assets and at todays rates you are NOT maximizing your potential return on your money by paying off your morgage early.

JohnG - Thursday, May 3, 2007, 12:02PM ET  Report Abuse

• Overall: 4/5

Good article since it allows you the option of paying down the mortgage. So many authors push mortgages and act like you are nuts for wanting to pay it off early. You would think they are being paid by banks or the IRS (its deductible)! When the stock market is finally coming around after SEVEN years of going NOWHERE, you would think the people who push long term mortgages would get a clue. Everyday you have a mortgage it expects to be paid. 24/7/365 whether you are employed or not, whether you are healthy or not, or whether Murphy has moved into your extra bedroom. Thanks for a little perspective and walking the thinking through.

Yahoo! Finance User - Wednesday, May 2, 2007, 5:27PM ET  Report Abuse

• Overall: 4/5

the article does an excellent job covering the correct issues and nicely recognizes there is a tax to be paid on the investment income as well as a tax savings on the mortgage payment. Too often I hear folks say take the mortgage because you save on taxes. There is a key value in maintaining liquidity which isn't mentioned in the article. Since short term funds are an important need, I would never advise someone to put all of their savings into the house. If there expenses are $8000 per month, say, they ought to at least keep $48,000 in savings to have a cushion against a financial hardship such as losing his or her job.

Singh is King - Wednesday, May 2, 2007, 4:29PM ET  Report Abuse

• Overall: 4/5

Good Article. Good comments by the CPA guy. We have to consider risk.

Joe - Wednesday, May 2, 2007, 9:35AM ET  Report Abuse

• Overall: 5/5

Excellent article! No plan is a plan to fail. If you don't change your direction, you might end up where you are headed. Here is a great tool to get you on track to financial success. This is a FREE, online, budget tracking program: http://www.checkthebudget.com

Yahoo! Finance User - Wednesday, May 2, 2007, 9:06AM ET  Report Abuse

• Overall: 3/5

A good article, but I am a CPA and would generally say that paying off the home is a better option. You formula neglects risk assumed by having a mortgage. If the house was paid for, would you borrow $180,000 to put in investments? I wouldn't. Once you own your house free and clear take your old house payment (like you are suggesting) and invest that amount. In the long run, you never know what is going to happen to the rate of return. In theory your advice makes sense, but not once you factor in risk. Also you do not adjust for taxes on the investment income either. So a rate of return of 8% on your investments is really as low as 4.8%. Sure you would have a tax deduction on your mortgage payment but that is just giving the bank a dollar to save 35 cents off your taxes. That is not good financial planning. Pay the house off, and when you have no payments you will understand why you did it. All in all though a good conversation/debate to have and a good article that is mathematically correct.