I don’t. But I’m old and went to school before loans were mandatory. (even if I had taken out loans, they’d be paid off by now).
I do, however, have a lot of mortgage interest I itemize each year. I’m working on that, and look forward to the day when I have paid off my mortgage.
I probably do live in a different world than you do. I have nice 2000 square foot house in a safe neighborhood (not trendy but low crime) with a 1/3 acre yard that’s about 10 minutes from my current job and about 30 minutes from an area with a truckload of tech jobs, and paid under $145k for it less than five years ago. The value has probably gone up now (better housing market, area is growing, I got rid of carpet for hardwood) but I would be amazed if it valued near $190k.
The median home price is pretty meaningless, because if you’re near a few really big cities (LA, SF, DC, NYC, Chicago) you’ll pay several times it for something basic, but outside of those cities you can get a nice house for less than the median, especially if you’re fine with an hour commute (which I think is unremarkable in the big cities).
I don’t, and a lot of people in trades don’t either. It’s definitely not a given, your experience isn’t actually universal.
Ric Edelman has a nice article about this: 11 Great Reasons to Carry a Big, Long Mortgage. Some of his reasons have already been discussed.
I’ve been a homeowner for over 25 years and never had mortgage interest totaling more than 5k. The highest price home i’ve owned was $65k, and it had 2 bedrooms upstairs, one bedroom downstairs, a huge foyer, two living rooms, a big dining room and two detached garages. $189k would get you a freaking mansion here. Right now there’s only a handful of single family homes for sale with asking prices of over $150k, and they’re in what are considered extremely wealthy neighborhoods.
I am surprised to hear that the combination of state income tax plus property tax plus mortgage interest is not above the standard deduction.
Depends on how much you pay. I enjoying being debt free.
But you never really own your land, you own it as long as you pay your property taxes.
I prefer to put that payment now into my bank account every month except tax bill month.
It is already adding up.
Those years are when I get excited. Stock sale!
Yeah dude, lots of us.
My wife finished her PhD 3 years ago, Didn’t borrow a dime.
I’m finishing my masters, no loan.
Course we didn’t go to Harvard.
Depends on your personal situation.
In my state (Kansas), for example, median household income is about $50K and median home values are around $120K (and outside the KC metro area, they’re even lower–here in Topeka, it’s about $93K). At those levels, you’re probably not paying all that much in taxes or interest, so no, they don’t exceed the standard deduction.
A two-income couple earning substantially higher wages and living in a wealthier city with a newish mortgage may be paying quite a bit more; a one-income couple making closer to average, in a less expensive home and some years into their mortgage probably isn’t. Generic advice that doesn’t take into account these varying situations is not applicable to everybody.
You shouldn’t be. As this article from 2007 says, fewer than 2 out of 5 tax returns itemize deductions.
You own it, it don’t own you.
Peace of mind for me is huge. I keep a lot of cash liquidity (say 2 years) just in case. Plus, I don’t have/didn’t have a better use for the money. interest income/bond yields are much lower that your mortgage rate (even factoring in the miniscule tax break). So unless you’re going to put your money to much better productive use, taking out 200 basis points is a good thing.
The overall benefits of paying off your house come into play when it comes time to retire. If you have the house paid off then you don’t have the monthly obligation to make mortgage payments. This lowers your living costs.
Just as a side note, in Canada where mortgage interest is NOT tax-deductible, almost everyone’s goal is to pay off the home ASAP. A friend of mine who worked at a bano head office mentioned (just before the US mortgage crisis, in 2007) that they had had feelers from a US mortgage insurance company, and that company had expressed amazement at how different the mortgage market numbers were.
Canada did not have a big crash like the USA, even though the house prices you quote (today) in this thread are ludicrously low by Canadian standards - especially for Toronto and Vancouver. Plus, banks will not lend mortgages unless the down payment exceeds 25 or the buyer gets mortgage insurance.
So there you go - if the only real incentive to NOT pay down the mortgage is the interest deduction, then that’s skewing the US market to a higher risk of foreclosure and bankruptcy. Canada managed to mainly miss the 2008 meltdown.
For example, I bought my first house decades ago for $C50,000, paid it off in 7 years, and lived rent-free for 20 years. I sold it for more than 3x original price. My current home is almost $C500,000 but 2/3 paid for. You may see a large mortgage as “underwater is someone else’s problem, I walk away”. I see my situation as “even if the market collapses to half, or I’m laid off, I will still walk away with some money in my pocket”.
You can’t really calculate the value of a house as another investment, because it also saves you the cost of equivalent rental of living space.
Remember that people itemized for other reasons. DC taxes are high enough that a single person starts hitting the threshold around $100k of income just based on local taxes alone. If you make any charitable donations, it’s even lower. And that’s for a renter.
I wish I could buy a house for $189k. I’ve been looking in and around DC, and the pickings are slim under $500k.
I’ve seen arguments for removing the deduction for state taxes, but that’s probably a discussion for another forum.
If you have a mortgage, you may be able to get a lower cost home equity loan for things like a remodeling project. That alone isn’t reason to keep the mortgage - the cost of those years of mortgage interest may offset any savings on the home equity loan.
I’m also in the “it’s a great feeling” camp. Most of the posts for this topic revolve on the money. That’s okay, but the intangible benefits are just as valid.
I will offer one significant fiscal benefit to full ownership, but it only applies to folks living in flood zones. If no lending institution is involved you can opt NOT to have flood insurance. My place is in a flood zone and not having flood insurance saves me about $1900 per year. Some would say I’m foolish but there has only been one flood event here, back in 1964. I’m self-insuring. Since 1992 I’ve saved $32,000. That pays for a lot of flood recovery if I need it.
Like everything law related, this will change by location; my own deduction is total payments up to a certain amount, an extremely different situation.
Yes, I understand urbanredneck is in the US and that in his case this information is accurate, but I thought I’d throw it out in case people searching from other locations run into this thread. Canada’s situation has already been mentioned and again it’s different from the US (no deductible there).
Just wanted to toss one wrinkle in. We owned our old house outright, then sold it and rented for a couple of years while we figured out where we wanted to live. We bought a fixer-upper, and spent the proceeds of the prior house sale. When we needed more $ to finish the renovations, we decided to take out what was to us a modest mortgage, instead of liquidating some investments. We could well afford the monthly payments, wouldn’t have to pay capital gains, and still have the investments for the future. Was a bit of a change for us, as we have long been of the belief that “no debt is good debt.”
And yeah, no college debt for me and my wife (old folk), and our 3 kids (mid-late 20s).
You shouldn’t think of it in terms of the tax deduction (if any) but rather the after tax rate you pay on the mortgage v the after tax return you can get investing the money in something other than paying back the mortgage. Above someone said it would be ‘very very rare’ to find an investment paying more than the mortgage rate but this is surely not true. The after tax return on stocks has generally averaged well above the rate on mortgages, and taking taxes into account would tend to make this even more true. There’s more risk to stock investments than mortgages (from the lender’s POV), so this should be true.
But the last part gives the answer, or lack of universal answer. Whether to pay back a mortgage depends (besides having the money to do so in the first place) on whether you want to take more risk to get more return. Paying back the mortgage is essentially investing in a riskless bond which pays the after tax mortgage rate. Keeping the mortgage outstanding and investing the money in the stock market is investing in something with a higher expected return than the riskless bond, but also more risk if things go worse than expected. The answer depends on the individual’s need and tolerance to take more risk in order to get more return.
And there are secondary issues like liquidity. You should have some money set aside for emergencies. If you put that into paying down the mortgage you will again tend to increase return (money sitting in a bank account will give lower return than the AT mortgage rate, typically) but not have as much ready money for emergencies, again risk. If we’re talking about money over and above that emergency need, then back to second paragraph.
I have that spreadsheet open on my screen now. 
As usual-it depends. The discussion starts with you having enough cash on hand to pay off the mortgage. Otherwise, there is nothing to discuss.
That cash is earning you some return.
The mortgage is costing you some amount (interest minus the tax break).
When the first is less than the second, pay off the loan.
If it were only that simple.
I also consider that the cash I have on hand is a contingency fund. I already qualified for a good mortgage and as long as I make the payments, which I can always do because I have cash in hand, no one can turn me down or tell me what to do. And I have cash for emergencies. That is worth something.
There is always the chance that a great investment will come along-even if it is a really good year in the stock market. I have cash to take advantage of that-assuming I am smart enough to see it coming.
And lastly and most importantly-home insurance. If you have a enough cash to self-insure, consider that route. It requires care, but don’t hold on to home insurance just because. Figure out what it would take to repair your house from conceivable damages. That is after all what the insurance company does. They put aside enough cash to cover losses. If you can do the same, you can save yourself a lot of money. This assumes you have the self-discipline to keep the money in reserve. But don’t just assume that “home replacement value” insurance is a stress-free way to deal with accidents. The insurance company will be quite willing and even anxious to impose considerable stress on you, in the form of offering you quite a bit less in replacement value than the contractor says you need, if you ever need to make use of the insurance. They certainly don’t just pay whatever the contractor bills. They have their formulas and ‘discussions’ will follow. Self-insure and at least you cut out the middle-man in those discussions. Of course this has nothing to do with liability insurance. That is always needed and insurance companies will offer that insurance separately from causality. At least mine will. Your Insurance May Vary.