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- Newsgroups: misc.consumers
- Path: sparky!uunet!mailgate.mobil.com!etpeters
- From: etpeters@dal.mobil.com (E. T. Peterson(Eric))
- Subject: Re: Dumb finance question?
- Message-ID: <1992Dec16.151338.5660@mobil.com>
- Sender: news@mobil.com
- Organization: Mobil Exploration & Producing Technical Center(MEPTEC), Dallas.
- References: <1992Dec16.013919.5753@acheron.uucp>
- Distribution: usa
- Date: Wed, 16 Dec 1992 15:13:38 GMT
- Lines: 30
-
- In article <1992Dec16.013919.5753@acheron.uucp>, clarke@acheron.uucp (Ed Clarke/10240000) writes:
- |> Here's a (maybe) dumb question for you ... given a fixed-rate no
- |> prepayment penalty mortgage of 10% (for example), is paying down
- |> the mortgage the same as getting a 10% return on your money? I
- |> THINK that it is, but something about it makes me nervous.
-
- Yes, it is as good as getting 10% on your money. In some cases it is
- even better! Examples:
-
- 1) Assume you have other itemized deductions that exceed your standard
- deduction. Then all of your mortgage interest payments are being used
- to reduce your gross income. In this case, paying off your mortgage
- is like earning a taxable 10% on your money.
-
- 2) Assume you have no other itemized deductions, and your mortgage interest
- payments are less than your standard deduction. In this case you should
- just take your standard deduction, and you are getting NO tax break by
- paying mortgage interest. In this case paying off the mortgage is like
- earning 10% TAX-FREE!
-
- 3) Other tax situations are between these two, i.e. you are earning between
- 10% taxable and 10% tax-free by paying off the mortgage. A great deal these
- days unless you are an investment genius!
-
- *********************************************************************
- Eric Peterson The sooner you fall behind,
- Research Geophysicist the more time you'll have to catch up!
- (214) 951-3251
- etpeters@drsol1.dal.mobil.com
- *********************************************************************
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