BUZ LIVINGSTON: Still OK to prepay

Published: Sunday, April 14, 2013 at 12:08 PM.

Yes, mortgage interest is tax-deductible so calculate whatever benefit you get by itemizing and adjust your interest rate appropriately. Don’t overlook the standard deduction. In 2013, a married couple can claim a $12,200 standard deduction.

A $250,000 mortgage with a 4 percent interest rate only chalks up $10,000 in deductible interest. With small mortgage balances, you don’t pay enough interest to itemize. Prepaying the mortgage is the equivalent earning a risk-free rate of return based on the loan’s interest rate.

With one year T Bills at .14 percent, paying off or avoiding a 4 percent mortgage improves your return 30 times — and that is a Louisville Cardinal slam dunk.

Buz Livingston, CFP offers hourly financial planning and fee-only investment management to clients along Florida’s Emerald Coast.  Contact him at 267-1068, Buz@LivingstonFinancial.netor www.LivingstonFinancial.net.

 

 

 



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