Motley Fool's Selena Maranjian found little ol' HP, and wrote about my post "Here's an idea - lose the mortgage", where I said never ever again will I have a mortgage - I'll sell my stocks if I have to. MSNBC picked it up too.
My argument is why pay someone interest, when there's no way the market will return 6%-8% annually over the next 10 years or so, not with our problems (past performance does NOT equal future returns). I'll take the guaranteed 6%, 7% or 8%, then invest any cash left over in risky stocks. And that mortgage interest deduction? Not as valueable as it's made out to be, and in risk of going away.
Bottom line - she disagreed with me. Do you?
As I was traipsing around the Internet the other day, I stumbled upon a blog titled "Housing Panic," where I read an interesting post. The writer asked for anyone's thoughts on this question:
"Anyone thinking of cashing in stocks, bonds, 401(k)s, etc., to pay off your mortgage instead? Say you have $200,000 in disposable financial assets, and a $200,000 mortgage. What do you do? ... My goal -- rent 'til this sucker blows over, then buy my next house for cash. No more mortgages for me..."
It's a question that many of us can relate to -- perhaps especially those who have already paid off a big chunk of their mortgage. Those with new mortgages might highly value the tax-deductibility of mortgage interest, but as your mortgage ages, you'll be paying less in interest and more against your principal.
My own answer would be that for most people, it's smart to keep the mortgage. There's that deductible mortgage interest, for one thing. And then there's the low interest rate that most of us, by now, should enjoy. When your rate is low, such as 5% or 6% or even 7%, you can compare that with what you'd make in the stock market over the long haul, and stocks will generally win out.
May 31, 2006
Posted by blogger at 5/31/2006