Saturday, January 8, 2011

Mortgages to Pay Off or Not?

Mortgage rates have been rising recently to about 5%. The lowest mortgage rate for 2010 was at 4.30%. I was able to refinance at 4.5%, pretty close to the low of 4.30%. My original mortgage rate was at 5.25% for 30 years, the refinance saved me about $200 each month..not bad.

I thought about selling some of my stocks and cashing out CD's to pay off my mortgage. I realized that it was a good decision to leave my money in the stock market. The stock market run has been nice with returns of about 15% for 2010 v.s. 4.5% by paying off my mortgage.

One thing to note about paying off your mortgage is that your actual mortgage rate is lower since you can deduct your mortgage interest on your tax return. So for example if your mortgage rate is 5% your actual mortgage rate is 4% because of your tax deduction.

The market isn't always going to guarantee a 15% or even a 10% return but it not very hard to make a 4% return.

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