Prepaying A Raleigh Home Mortgage - Good Idea?
One way to think of this is that interest and property taxes on a person's primary residence are one of the few income tax deductions that are still available to a taxpayer.
A tax deduction does not reduce what you pay in taxes dollar for dollar, but it does reduce it by the tax rate of the individual taxpayer.
For example, let's say you have tax deductions equaling $10,000 and you are in the 28% tax bracket - it would save you $2,800 in taxes. However, you still spent $7,200. You then must ask yourself: did I get $7,200 worth of economic benefit?
Let's do the Math: Say you have a mortgage at 6% interest. You have an extra $100 a month and you want to put it where it will do the most good.
If you put this extra $100 in your savings account, you might earn 2%. If instead, you make an additional $100 principal payment on your 6% mortgage, you will have a 4% net gain without any tax considerations. Whichever tax bracket you are in, you save money in this scenario.
The answer the prepaying a mortgage question is answered by asking yourself if you can earn more in another investment than the rate you are paying on your mortgage. If not, then in most cases, you will probably be better off pre-paying your mortgage.
There is another consideration you need to think about. Will you need that money in the near future? Having access to your home equity is not always easy. Having that extra $100 in your account available to you if you need it may be something you need to consider.
Other things to consider when buying a Raleigh home are Pre-Approval vs. Pre-Qualified, Questions You Need to Ask a Raleigh Realtor and Raleigh Home Buyer - Don't Trip Up Your Raleigh Home Loan.
If you have questions about a Raleigh Mortgage or any Homes In Raleigh,
Email Us or Call Us Today at 919-280-2726
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Content By Erin Bohner
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