# WHY we paid off our mortgage!

This is the first of a two part blog post! The next one will be on HOW we paid off our mortgage. This one will focus on WHY.

My husband and I paid off our house in six years of marriage. We owed \$160,000 on our mortgage at the time. I also owed about \$6,000 for school loans that we paid off within the first year of marriage. Scott (my husband) had some school loans but they would be paid off through a grant program as he taught at a low income school district in Ca. That was all our debt. We didn’t, and still don’t, do credit cards and we pay cash for vehicles.

Early on we wrestled with the idea of paying our house off because of the tax deduction we got for having a mortgage. Dave Ramsey helped us out with that decision though:

If you have the opportunity to pay off your home and you don’t pay off your home in order to keep the tax deduction, that would be an indication that you are poor at mathematics. Let me help you with the mathematics on this. Let’s say you have a \$200,000 mortgage at 5% interest. If you have a \$200,000 mortgage at 5%, that would be \$10,000. We have a \$10,000 tax write-off because we have a \$200,000 mortgage at 5%. That’s a tax deduction, meaning if that couple makes \$75,000 a year and they take a \$10,000 tax deduction, they don’t pay taxes on \$75,000. They instead pay taxes on \$65,000. If you do this weird Dave Ramsey thing, though, and you pay off the house, you no longer pay taxes on \$65,000 because you would not have a tax deduction. You’d have to pay taxes on \$75,000. You’re in a 25% tax bracket if you make \$75,000 a year. That \$10,000 a year that we’re talking about is taxed at 25%. By paying off your home, 25% of that \$10,000 that you’re going to have to pay extra taxes on is \$2,500. In essence, you lost a \$2,500 savings on your tax bill, but you gained \$10,000 by not having to pay it to the bank. A \$10,000 tax deduction is the same thing as saying, ‘I would rather give Countrywide \$10,000 than give the government \$2,500.’Continue reading