Pay Down Your Mortgage or Invest?
Have extra cash? Should you invest it or use it to pay down your mortgage? When you pre-pay part of your mortgage, you end up paying less in interest. But, as a result, you also lose part of your mortgage interest tax break.
Your true savings, then, can be expressed as the difference between your mortgage interest rate and the rate at which you take your deduction (a function of your total marginal tax rate). If that net percentage is less than the amount you could make investing the cash, you’re better off investing it.
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