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Q. I have a checking account that earns 5 percent and is used solely for mortgage payments. How much must I have in the account so that I’d need to make no further deposits to pay off a mortgage with a $58,497 balance and $905.14 monthly payment?
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But if he has that much, why not just pay off the $58,497 balance and get free of the mortgage right now? After all, by making 75 more monthly payments, he’d end up paying nearly $68,000, including interest.
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It’s a little more complicated. You forgot everyone’s favorite uncle! Samuel.
TAXES!!!! :-(
So the correct solution depends on facts not yet in evidence, judge.
Project the taxable income over the problem time domain. Figure that the checking account’s 5% is reduced by as much as a third and as little as zero depending upon the marginal tax rate. The home mortgage interest deduction and property taxes MAY be available depending if there is enough deductions and the AMT isn’t triggered.
Now I’m an ingineer by training and an IT geek by vocation, I am neither an economist, accountant, nor lawyer. Nor do I play one on TV! So I have nothing but some math skills, a few advanced tax courses from my mba, and some common sense. In the absence of some overpowering rationale, I’m a Dave Ramsey fan, and say pay the thing off under almost any circumstance. IMHO.
Get a HELOC for an emergency fund, if you really need that cash for a emergency fund. Get it from a credit union for the best deal.
imho, fwiw, faiwwypfi!
Reinke Faces Life 