Why You Should Pay Your Mortgage Off Early

Over the past three years, I have mentioned the idea of paying off your mortgage early. It is an intelligent idea, but invariably someone will disagree with me. They will even out right say Dave Ramsey and John Cummuta wrong, when I quote them. However, maybe they will believe another man. One that is very wealthy in his own right. One who sends out regular educational emails to those (like me) subscribe to those emails. However, even I was surprised, because this multi-millionaire is known to borrow for his various ventures. His name is Donald Trump and the email subscription is Trump University.

The most common objection that I hear (and even according to Trump) is “If you pay off your mortgage sooner, you won’t be able to get a tax deduction.”

Technically this is true, but it’s a ridiculous statement. Let’s assume you’re in the 28 percent tax bracket. Each dollar of interest you pay the mortgage company is deductible. This will save you 28 cents you would have otherwise paid to the IRS on that dollar as income tax. But think about that. You’re giving up a dollar to save just 28 cents of federal income tax. On the other hand... if you pay off your mortgage, you will certainly have to pay 28 cents on each dollar not going to mortgage interest... but you’re getting to keep the other 72 cents!

So while this objection is technically correct, they are, in essence, saying, “Keep on paying a dollar of interest to the bank in order to save 28 cents in taxes.” Does that sound like good advice to you?

Oh, and don’t forget: You still get the full mortgage interest tax deduction while you’re paying off your loan... it only ends when your mortgage is paid off.

- Trump University -- Prepaying Your Mortgage

Listen, I am not going to criticize anyone for taking out a mortgage, but if you think you have to keep paying the bank, so you can have that deduction, think again. Why would you give away $1 to get 28 cents back?

Not to mention, if you go the full 30-years on a 30-year mortgage, you are paying for your house almost 3 times. For example, if you buy a $300,000 home, with $50,000 down. Borrowing the remain $250,000 at 7 percent, you’ll end up paying $598,769 over the life of the loan (not even including taxes and PMI). You see that? That's $348,769 in interest, on a $250,000 loan. Is that crazy or what? How can anyone continue arguing against paying off the mortgage early? With that kind of evidence, I was more convinced to pay off my mortgage as quickly as possible. That is why I am so glad mine is paid off, and hope everyone else will see this evidence to.

You know what else? The same thing can be said about a car loan. Due to that, I have been paying extra on the car, that Dave Ramsey would, encourage me to sell. I want to keep the car, which is the best (and newest used) car I have ever owned. This year, i will have it paid off. A full year and some odd months early.

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