Keeping a mortgage to save on your taxes
If you're like me then you have probably heard the suggestion that you keep a mortgage in your life for the tax write off. In some cases people are even advised to increase their mortgage rather than pay it off to save more. It may sound like good advice, but its NOT. Here is why
For the sake of argument you have say a $200,000 home. Your yearly income is $85,000 The amount of interest you pay a year on the mortgage is say $10,000 So using that as a deduction for your taxes, it adjusts your income to $75,000 so that's $10,000 you don't pay taxes on. Now because of your salary amount lets say your taxes are in the 30% tax bracket. That means that the $10,000 deductible saves you $3,000 in taxes. To save that $3,000 in taxes you are paying $10,000 in interest.
Better off paying off the mortgage and paying uncle Sam the $3,000 than saving the $3,000 and paying the bank $10,000.
In the end, there is no reason to keep that mortgage. Pay it off!