New Rule: Pay Off Your Home Mortgage!

For as long as I can remember, having a home mortgage was considered ‘good’ debt.  The reason was that you were borrowing money to buy something that’s expected to increase in value…AND you received a tax deduction for your interest payments!

What’s changed?  In 2017, 32 million taxpayers were eligible for the mortgage interest deduction.  Now, under the Tax Cuts & Jobs Act (i.e. the Trump tax law), that number has dropped by 57% to just under 14 million…so lots of taxpayers lost one of the most important incentives for having a home mortgage.  Without a deduction, your mortgage is just another debt.  It’s important to note that under TCJA, most taxpayers will pay less income taxes even if you’re no longer deducting your mortgage interest.

If you have other debts, how do you decide which to pay first?  Under the old way of thinking, all non-homeowner mortgage debts got paid while paying home mortgage debt ‘on schedule’.  Now, if your mortgage debt is not deductible because you’ll file using the standard deduction (went from $12K to $24k for joint filers), you’ll pay the highest interest rate debt first, followed by the next highest until all debt, including mortgage debt is paid in full.  This includes any student loans.

The sooner you get debt free, the sooner you can begin investing (lots more money).  There’s nothing quite like the (financial) feeling of being debt free and it’s the key to creating financial freedom for yourself and your family.