August 2007 Vol. 2 No. 8

 Should You Pay Off Your Mortgage Early? 5 Questions To Help You Decide  August's Home Value Improver  About Us


Should You Pay Off Your Mortgage Early? 5 Questions To Help You Decide

I don't know about you, but I could really live the high life if I didn't have to pay my mortgage. Imagine thousands of dollars each month to do with what you please. That would be heavenly - or would it? Like most financial decisions, the equation is not always that easy. Tax breaks, your goals, and your mortgage's age are just three of the things that play into the equation.

If you are in the position to pay off your mortgage early (congratulations, by the way), ask yourself these five questions to see if doing so is your best financial move.

1. Is your mortgage fairly new?
If so, you have many years of mortgage interest ahead of you, so you'll enjoy tax benefits for years to come. And much of your payment is interest right now so there's a lot of interest to write off. Paying off your mortgage may not be in your best interest because you will lose out on the deductions - especially if you are in a high tax bracket. Conversely, if you have less than 10 years left on your mortgage or are in a low tax bracket [or both], you are not getting much of a deduction, so paying it off may be more beneficial to you.

2. Are your other important accounts funded?
How are your retirement and children's college accounts? If you're paying off your mortgage to the exclusion of these other important accounts, you're making a mistake. You need those investments as much as you need your home. When you're faced with these big expenses, you don't want all your money tied up in your home. Your home is the least liquid of all of your investments.

3. Have you done the math?
Figure out how much you will save over the life of the loan, and compare that to the tax savings. Also think about other investments you could make with the money (mutual funds, bonds), and estimate their value as best you can. Is it worth it?

4. Is the emotional appeal of owning your home outright more important than other considerations?
If so, do what you need to do. The changing whims of the real estate market can be stressful for a lot of people. Owning your home outright may alleviate much of that stress. Your emotional security is worth more than a financial equation.

5. Do you have debt?
Your mortgage is really the cheapest money you can get. Don't accelerate your mortgage, which has an interest rate around 7%, instead of digging yourself out of credit card debt, which can be as high as 20%! If you have decided that paying early is right for you, determine the best way for you to do it. A popular method is making a payment every two weeks. However, you can end up stuck with a lot of fees. The best method is simply increasing your monthly payment. Let's say you want to make one additional mortgage payment a year. Take the amount of one payment and divide it by 12. Then, add that amount to your monthly payment.

Be sure your lender knows that the extra money is for your mortgage principle. And, find out if there is any fee for paying early.

August's Home Value Improver

Make Your Home Office Work for You

More and more people work from home today, whether they do it full time or for only a few days a week. Take advantage of working from home by making your home office work for you. Even if you don't work from home, you need a place to pay bills, file important papers, and do the business of running your home.

Find your spot. New homes often have a room conveniently designated for a home office. But, not everyone has a new home - or a home office. If you're not fortunate to have that room, do not fear. You can create a home office just about anywhere in your house. You may have a large landing on your staircase, or a corner of the living room, or even a large closet. Any of these spaces can be perfectly good home offices.

Claim your space. If you are using a spot that is part of another room, try to keep it separate. Set up your office behind the couch, or use a room screen to keep the office and room separate.

Plan the space. Avoid putting furniture down willy nilly. Think about the flow of your work and your day. Do you want to sit by a window? Be careful not to place your computer somewhere in which it will get too much sun reflection.

Create your desk. If you don't already have a desk, you don't have to race off to Office Max to buy one. With today's small laptops, you really just need a place to be able to write, set out papers, and have some storage. A board between two filing cabinets, a small kitchen table, or just about anything that is a comfortable place to sit and work will suffice.

Decorate. Look around your home for items that will spruce up your workspace. Do you have some old framed print or photographs in frames that will jazz the place up? What about a comfy chair from the guest room? In your office, it could be a cozy place to do work reading, conference calls, or even napping (shhhh, don't tell the boss.) Paint the walls if your office has walls. A fresh coat of paint can really make the room seem new and homey.


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The stock market is going crazy and the subprime mortgage fallout continues. I thought summer was supposed to be quieter!

Too many people are struggling to make sense of the mortgage programs they're in and how high their payments may climb. And it's become more challenging than ever to get a new mortgage or refinance because lenders are running scared.

Even if you did not arrange your current mortgage program through Westchester Mortgage, I am always happy to help you understand the program you're in. Please feel free to call or email anytime!

Best regards,
Debbie Siegel
Westchester Mortgage

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Click here to read my Mortgage Minute in's monthly newsletter. This month's column: The Secret Behind Mortgage Rate Charts.

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