Asked by Gregory  |  Submitted November 16, 2016

Is it more advantageous for tax purposes to pay off a first mortgage when the rate is fixed at 3.25% if the money is only making 0.3% interest?

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  Answers  |  1

November 22, 2016

Hi Gregory,

For tax purposes, there are only 3 ways to legally avoid paying taxes
1) Bury the asset with you upon your death
2) Give the asset to someone else (friends, family, etc)
3) Take a greater loss to offset the tax gains

Some suggestions for you:
1) Are you currently living in this property? If yes, how long to you plan to stay there? If no, go to the next suggestion.

2) If your money is only making 0.3% and you are spending 3.25%, you are losing money. Even before the “money illusion” of adding inflation. What is your required rate of return (Hint: It should be greater than your debt rate)?

3) You mention “first mortgage”. Do you also have a second? Either way, affordable debt reduction is not a bad idea. Now, if you desire to increase your ROI, we need to get together and dive into greater detail.

Hope this helps and you can contact us directly for further discussions. No obligation.

It’s not what you keep; It’s what you make that determines your lifestyle.

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