Thursday, September 30, 2004

The trouble with pre-payment

For those in the 35 percent combined federal and state tax bracket, paying off a 6 percent mortgage early generates a return of 3.9 percent, according to Ann Perry in Thestreet.com. If you invest that cash in the stock market for the long term, more than 10 years, you should earn 10 percent pretax and 6.5 percent after taxes. Still can't resist? She says to use no more than 10 percent of your portfolio to trim your house note. Keep tax consequences in mind; making early payments will lower your mortgage interest deduction. To gauge how different prepayment scenarios will play out run the numbers at Jeacle.ie.

0 Comments:

Post a Comment

<< Home