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Pro's and Con's of keeping home loan vs pay off..

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Pro's and Con's of keeping home loan vs pay off..

Old 06-07-2015, 08:30 AM
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Default Pro's and Con's of keeping home loan vs pay off..

Just a couple days ago I was happily surprised by the small balance left on a home loan from our first house (actually is even better because is a 100% HELOC and not a traditional loan).
At this rate it will be paid off in little over a year...

I have heard arguments on both sides of the fence about what is better, if to pay off and fully own, or to keep a small debt, but I'm still not educated enough...

if you have personal experience on finally paying a home loan to own, or if you are educated on the intricate details of owning vs keeping a small debt, I would like to hear your take and appreciate your advice...
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Old 06-07-2015, 08:39 AM
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If it is a small balance, like one that would naturally pay off in a year, then it really does not matter.

I paid mine off years ago. There are decent arguments each way. To me it was worth it. Slept better knowing the "take back man" could never come knocking, no matter what life in the self-employed world handed me. Never regretted it.
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Old 06-07-2015, 09:00 AM
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Originally Posted by Corndog38 View Post
If it is a small balance, like one that would naturally pay off in a year, then it really does not matter.

I paid mine off years ago. There are decent arguments each way. To me it was worth it. Slept better knowing the "take back man" could never come knocking, no matter what life in the self-employed world handed me. Never regretted it.
^^^ This ^^^
I'm certain there are financial pro's and con's, but there is a lot to be said for the piece of mind in just knowing its mine. Payoff is my goal.
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Old 06-07-2015, 09:29 AM
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Spending money to save a few dollars on taxes never made much sense to me.

Let's say your interest expenses on the loan are $1,000.00 and that yields a $200.00 savings on taxes. You're still out $800.00.

I'm sure Dave Ramsey says "Be debt free."
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Old 06-07-2015, 09:52 AM
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Originally Posted by Tyme2fish View Post
Spending money to save a few dollars on taxes never made much sense to me.

Let's say your interest expenses on the loan are $1,000.00 and that yields a $200.00 savings on taxes. You're still out $800.00.

I'm sure Dave Ramsey says "Be debt free."

If you are paying 3% for that 800 and making 10% on it. Are you losing or making money?
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Old 06-07-2015, 10:34 AM
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Originally Posted by mitchk View Post
If you are paying 3% for that 800 and making 10% on it. Are you losing or making money?

this.


It's called, "opportunity cost", and only you can judge the details that would be based on how you invest and whether the return comes back like you thought it would, and your tax status.

If you're loaded with debt, then relieving that installment might increase your credit score.
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Old 06-07-2015, 10:39 AM
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Debt free is a soft pillow.
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Old 06-07-2015, 11:34 AM
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Originally Posted by emudryj View Post
Just a couple days ago I was happily surprised by the small balance left on a home loan from our first house (actually is even better because is a 100% HELOC and not a traditional loan).
At this rate it will be paid off in little over a year...

I have heard arguments on both sides of the fence about what is better, if to pay off and fully own, or to keep a small debt, but I'm still not educated enough...

if you have personal experience on finally paying a home loan to own, or if you are educated on the intricate details of owning vs keeping a small debt, I would like to hear your take and appreciate your advice...
There's no big advantage to "fully owning" your house, other than giving you a warm fuzzy. It's not like you are close to being underwater on it.

The interest either way is negligible at this point. If you pay it off, are you disciplined enough to use the money you save and put it back into your savings?

There are some times when it's a bad idea to pay it off - for instance if I have $30k in savings and owe $25k on the house. If you pay it off and are "debt free" then unexpectedly lose your job, you're screwed. If you keep the debt and then lose your job, that $30k can continue to pay your monthly mortgage as well as other bills for a longer period.

Debt free doesn't mean squat if you don't have cash to cover your other expenses.
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Old 06-07-2015, 01:30 PM
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Originally Posted by Corndog38 View Post
If it is a small balance, like one that would naturally pay off in a year, then it really does not matter.


There are decent arguments each way.

I agree
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