Owning your home free and clear has always been the dream of most Americans throughout history.  But does it make sense to dig into your savings and pay off your mortgage early?

You have to compare the mortgage tax breaks versus the after-tax return on the money you use to pay off the mortgage.

Jill Schlesinger, from CBS MoneyWatch.com, analyzes this issue in her blog.  A reader, (Sally from Baltimore) asks whether she and her husband should pay off their mortgage. They owe $95,000 at 4.625 percent with seven more years to go.

"If Sally and her husband are in the 28 percent tax bracket, the after-tax cost for the mortgage would be 3.33 percent (4.6 x .72)." writes Schlesinger, "and if Sally is drawing on a money market that's only yielding 1 percent, it's easy-pay down the mortgage."

"Conversely, if she thinks she can earn more than 3.3 percent on an after-tax basis with her investment account, she can keep making payments as scheduled."

Read more at CBS.com

photo credit: Paul L McCord Jr

Posted in Headlines, Mortgage, Real Estate Market Conditions

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