Re: Make your life easier. Why give the mortgage company so much of your pay check over so many years?
Depends on the situation
Date: September 02, 2018 12:55AM
It all really depends on your mortgage rate and how much of your interest payment is deductible. If you have a sub 5% rate (and I know folks who have under 4%), it usually makes sense to pay off other higher interest rate debts and if you don't have those, invest the money elsewhere. It isn't hard to beat 5%; The S&P 500 average annual return is about 10%.
The home interest deduction itself isn't what it used to be, primarily because of the much higher standard deduction and the cap on SALT at $10,000. If you max out your SALT deduction and no others are in play, the first $14k of your annual mortgage interest isn't deductible, at least when assessed against the married standard deduction. This doesn't financially screw existing home owners too much, it just means many of them are captured by a still fairly generous standard deduction. That said, the tax law change does mean the home interest deduction doesn't lower the effective interest rate of a loan by as much as it used to.
My take; during rocky financial times, if you have money and want a decent predictable return, paying down the mortgage can be an OK thing to do. But to miss out on a 20%+ stock market year like 2017 because you throw that money to help pay off a 5% mortgage. Insanity.