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Mortgage Or No |
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Dear Edith, My husband and I presently rent a small apartment, but are planning to have a family and expect to want a bigger place. He has some inheritance from his grandparents that would enable us to buy a small home without taking a mortgage loan. My question is whether the tax advantages of having a mortgage (added to the expected income that the money would earn if invested elsewhere) would actually make it a good idea for us to get a mortgage loan In case this factors into the answer, we are in the 28 percent tax bracket |
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Everyone's financial situation is different, and so are their emotional feelings about money and debt. For some people the satisfaction of owning a mortgage-free house yields what’s known as “psychic income.” For others, of course, money in the bank does the same thing.
You might as well ignore the tax aspects of having a mortgage versus paying all cash. Remember that the “expected income” the money earns elsewhere would be subject to taxes. Take my word for it, it’s more or less a wash. Forget that part.
The first place to put extra money is in paying off credit cards if you've been carrying balances -- and then not running them up again. Next you should have three months' living expenses somewhere easily tapped in an emergency -- six months is better.
After that – sorry, but there’s no one right answer
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Edith
Originally published on June 6, 2006 |
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