One of the biggest misconceptions in America today is that your mortgage is a good thing, or that your home is an investment. You maybe saying to yourself, “yes it is.” Let’s look at it from a different perspective than what you have always heard from those who are so called real estate experts.
First and foremost your mortgage is a debt, often called “good debt.” Folks, there is no such thing as “good debt.” If you owe somebody money, whether an individual or finance company, you are beholden to them, you are their “employee.” Consider that in 1929 only 2% of the homes in this country had a mortgage; conversely by 1962 98% had a mortgage. During this same time wages went up, so it was more of a philosophy that changed these figures.
You might be thinking, but what about the mortgage deduction? Let’s assume your mortgage payment is $1,000 a month, or $12,000 a year that is going to your bank. Let’s also assume you are in the 30% tax bracket. That means that your deduction is approximately $3,600. So spending $12,000 will get you a $3,600 deduction from Uncle Sam. Money in, money out, it doesn’t make sense folks!
Assume you take out a 30 year mortgage for $135,000, at a rate of 6%. At the end of the 30 year mortgage you will have paid approximately $290,000 to the bank. That means you are paying about 47% in interest. Compound this because most people will move several times in their lifetime, thus starting this pattern over again.
Being “mortgage free” is a smart thing. Even if you throw out the figures, just stop and think about not having to write that monthly payment for your mortgage. It will give you peace of mind, and freedom. That alone is priceless!