Pay off your mortgage IF . . .

Our friend Helen Rogers thought you might be interested in this good advice from Scott Burns, a syndicated columnist with the Seattle Times:


*Q:* Our youngest child graduated from college last year. Since then we have been able to save a bit more money. By June we will have 42 months left on our mortgage with 6.8 percent interest. The payoff is projected at about $40,000. Should we pay off the mortgage at that time, or ride out the remaining few years?

*A:* You didn't say where you lived or what your real-estate taxes are, but there is a good chance that you will receive no tax benefits from your mortgage-interest payments because all of your deductions may be less than the standard deduction.
This year (2009), the standard deduction is $11,400 for a couple and $5,700 for a single-person household. Until your itemized deductions exceed the standard deduction, you won't save any taxes.

Many couples start running out of itemized deductions right at your life stage — when the last kid is out of the nest. So here is your task. Add up your itemized deductions. If the total is less than $11,400, paying off your mortgage is a slam-dunk investment. You'll save the mortgage interest.

In effect, you'll earn 6.8 percent. You'll also eliminate the monthly mortgage payment, which will make it easy to increase your tax-deductible 401(k) contributions. And you won't have to pay income taxes on the piddling amount of interest you'll earn on the $40,000.