Re: paying off my parent\'s mortgage..help needed
 

Risk v. Return ...blah blah blah.

Re: paying off my parent\'s mortgage..help needed
 

If:
(your mortgage rate) - (your mortgage rate X your income tax rate)

is greater than:

(your annual return where you would otherwise invest the money) - (your annual return X applicable capital gains/income tax rates),

having a mortgage makes no sense. Obviously with all the low-rate mortgages that have been available recently, you probably don't need to make much of a pretax return on your alternative investment to make a mortgage worthwhile (provided all your alternative investments will be taxed as long-term capital gains).

To imply that money tied up in real estate is "doing nothing" is ridiculous. There are 2 sides to the equation.

There is also the psychological factor of living in a house that is paid for, and this may well override the extra 2.5% or whatever on the 50k that keeping the mortgage will allow.

Re: paying off my parent\'s mortgage..help needed
 

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And so you have a couple hundred to several hundreds of thousands of dollars doing absolutely nothing for you. Brilliant!

Real estate appreciates. The money you have tied up in it is not doing nothing. If you buy a house for 500k tomorrow, do you think 500k is all it will sell for 15 years from now? Brilliant!

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The rate of appreciation is not effected by the size of any potential mortgage. The returns generated from other financial investments are directly proportional to the amount of capital invested. So your house will go up in value AND you will get the returns on any stock/bond/real estate/etc purchases you make with the money from the mortgage AND you will deduct your mortgage payments from your taxable income. The US gov't gives FREE MONEY to house owners in this country. By not taking out a mortgage you are saying 'no thank you'.

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Do you understand basic math? You get a deduction from your taxable income for your mortgage payment. So if your mortgage payment is 10K a year, and you are in a 30% tax bracket, you are paying the bank 10K to get a 3K deduction. That doesn't add up.

Re: paying off my parent\'s mortgage..help needed
 

one thing: you have topay taxes on capital gains. so if i beat market for 10%, im really only beating it for 6.67% or is this incorrect thinking?

Re: paying off my parent\'s mortgage..help needed
 

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one thing: you have topay taxes on capital gains. so if i beat market for 10%, im really only beating it for 6.67% or is this incorrect thinking?

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there are ways to minimize this stuff. if you have 50k to give to your parents you REALLY need a top notch financial planner.

Re: paying off my parent\'s mortgage..help needed
 

So if your mortgage payment is 10K a year, and you are in a 30% tax bracket, you are paying the bank 10K to get a 3K deduction. That doesn't add up.

You can only deduct the interest portion of your mortgage payment from your taxable income.

Re: paying off my parent\'s mortgage..help needed
 

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one thing: you have topay taxes on capital gains. so if i beat market for 10%, im really only beating it for 6.67% or is this incorrect thinking?

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Long term capital gains are taxed at a much lower rate than regular income, so no. You just have to make sure what you invest in qualifies as capital asset and you hold it for more than 1 year (unless you have short-term capital losses to offset).