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| 9858 Clint Moore Road, Boca Raton, FL 33496 | Caesar: (561) 715-8630 or Eileen: (561) 271-1311 |
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Planning For Your Retirement…Do You Keep The Mortgage?
There are two schools of thought regarding residential mortgages during your retirement years. One says it is a sound financial strategy to retain the mortgage, while the other prefers the security and peace of mind that is a result of being mortgage-free. Which works for you?There are two schools of thought regarding residential mortgages during your retirement years. One says it is a sound financial strategy to retain the mortgage, while the other prefers the security and peace of mind that is a result of being mortgage-free. Which works for you? • Maximizing Investment Return. If you have a low mortgage rate, it makes sense to invest extra funds in an investment vehicle that would earn a higher total return. If you pay off your mortgage, your investment return is equal to the mortgage interest rate. For example, if your mortgage rate is 5.5%, you must ask yourself if you can earn a higher return by investing the funds elsewhere. You should compare your mortgage rate to other long-term investment rates of return. If you are comfortable with the risk/return of a higher-yielding investment vehicle, then it is beneficial to invest the extra funds instead of paying off the mortgage. • Mortgage Interest is Deductible. In the 1980's, tax law changes eliminated the deductibility of most types of interest, leaving only residential mortgage interest as deductible on your income tax return. Therefore, it is better to borrow against your home equity to purchase a car, make home improvements, or finance other large ticket items, rather than to secure a non-deductible car loan or other personal loan in retirement. After the income tax savings, a mortgage interest rate of 7% will net down to approximately 5%, making a home equity loan more cost effective than a car loan with a rate of 6.5%. • Forced Savings. For some homeowners, paying the mortgage is a type of forced savings. With each payment, some amount of principle is being paid down on the loan, therefore, increasing the equity in the home. If the house is also appreciating in value, the equity continues to grow. Real estate agent Caesar Parisi stands ready with effective advice on buying or selling Boca Raton FL condos. click here for article |
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