at a faster than normal rate. Mortgage interest is deductible on federal income taxes. Callies bought several investment properties through accelerated payment plans, but she is paying the mortgage on her current primary residence according to the original amortization schedule to keep one tax deduction.
But Charles Ray, a real estate broker who teaches real estate investing classes with Silver Dollar Realty in San Antonio, says it’s better to get rid of a mortgage, freeing up money for other investments: “If you are in a 33% tax bracket, only one-third of the interest you pay is deductible. And if you are in the 15% tax bracket, it’s even less.”
How to Pay Off Your Mortgage Faster
- Make one extra monthly payment each year
- Round up your monthly payments to the nearest $10 or more
- Put one-third of your income tax refund on the principal balance
- Skip one discretionary expense, such as a lunch or video rental, and put that money on the principal balance
SOURCE: LISA BOULDIN-CARTER, BORROWSMART