Mortgage – Pay off mortgage in 15 years, or 3 years taking into account tax savings and interest savings.?
Question about pay off mortgage in 15 years, or 3 years taking into account tax savings and interest savings : I’m looking for a mortgage calculator online that will help me determine which option would be better: 1) If we spread it out and pay the mortgage in 15 years, or 2) if we pay it off quickly in 3 years.
I need it to take into account both tax benefits AND interest savings. So far I’ve only found calculators that take into account one or the other when doing a comparison, but I need both factors, and even something that takes into account investing as well. Does anyone know where to find something like that?
Answer about pay off mortgage in 15 years, or 3 years taking into account tax savings and interest savings : Let me just say, mortgage math problems are fun for me. To answer your your first question, it is my opinion you should pay off the mortgage as quickly as possible. I am doing the same. Really it is a simple math problem. But the quicker you pay back the mortgage the less you pay in interest, which then (the savings of not paying more interest) can be used as investment capitol, or to be debt free. To pay out interest is a weight around every ones neck.
There is absolutely NO advantage in prolonging your mortgage to get a tax savings. Let me illustrate: Say this year you get a 1099-INTEREST statement saying you paid $10,000. And your tax bracket is 33%. You will get back $3,300 in a tax break and you still paid interest to somebody in the amount of $6,700. Okay suppose I offered you the same deal, If you give me $10,000 cash, I will give you $3,300 back. Do you see the point?
There is no deal and you are still losing 2/3 of your money to interest. In dollars and sense: If you have a $100 k loan @ 5% for 15 years, you will pay $41,862.68 in interest. But if you pay it off in 3 years, you pay only $7812.32 in interest, (A savings of $34,050.36) and you are free of this debt.
If you argue about the tax savings, it is $11,236.61 over 15 years.Below is the mortgage calculator I use. It is fun to play with, and you can immediately see the savings.
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