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  1. #1
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    Should I renew my CD or pay off mortgage?

    I have a CD that is going to automatically renew for 15 months at 1.85% or 5 years at 2.85%. I'm paying 5% on my mortgage. Should I cash the CD and pay the mortgage off? They always say not to do this, but if I'm paying more interest on the mortgage than the CD is making, it seems like a good idea. I guess I would have to figure how much my income tax would go up as there would be no deduction for mortgage interest. Any suggestions?

    GO CYCLONES!!!



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    Re: Should I renew my CD or pay off mortgage?

    If you are just saving the money and don't need it, pay off your mortgage. They say not to do it when the int. rates are opposite. Say your mortgage is 5% and the CD was earing 7%, then you would be +2%, the way it is you are -2.15%.



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    Re: Should I renew my CD or pay off mortgage?

    Not being a financial expert I will give you my opinion. I say to pay off the mortgage that way it's paid off. Being able to put that extra income into some other place, saving or fun money every month, would be a great feeling.



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    Re: Should I renew my CD or pay off mortgage?

    Quote Originally Posted by cycfan View Post
    I have a CD that is going to automatically renew for 15 months at 1.85% or 5 years at 2.85%. I'm paying 5% on my mortgage. Should I cash the CD and pay the mortgage off? They always say not to do this, but if I'm paying more interest on the mortgage than the CD is making, it seems like a good idea. I guess I would have to figure how much my income tax would go up as there would be no deduction for mortgage interest. Any suggestions?

    GO CYCLONES!!!
    Did you itemize last year and do you intend to itemize this year?

    If you did not itemize, then paying off the mortgage will have no effect on your tax bill.

    If you did, you can use last year's mortgage interest as a general guide for what you'd be paying this year and multiply that by your tax bracket to see what that deduction saved you. ($1000 of mortgage interest in the 15% bracket would save you $150 in taxes)


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    Re: Should I renew my CD or pay off mortgage?

    Renew the CD, you can deduct the mortgage.



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    Re: Should I renew my CD or pay off mortgage?

    Get out of the CD and invest the money. Any decent financial advisor should be able to get you way more than 5%. With a mortgage at 5%, do not pay it off.



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    Re: Should I renew my CD or pay off mortgage?

    a.)seek sound financial advise from people who don't spend their day passing time on CF......

    b.) get some phat pants

    c.) learn this dance.....and enjoy your money........

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    Re: Should I renew my CD or pay off mortgage?

    Send it to me.



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    Re: Should I renew my CD or pay off mortgage?

    Quote Originally Posted by CYKXBUT View Post
    Get out of the CD and invest the money. Any decent financial advisor should be able to get you way more than 5%. With a mortgage at 5%, do not pay it off.
    wow.


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    Re: Should I renew my CD or pay off mortgage?

    Without knowing the details of your situation I would say pay the mortgage. I'm guessing that if you have enough money sitting around in a CD, that you don't have much left on the mortgage. If you don't have much left on the mortgage, your payment is mostly principal so it probably isn't doing much for your tax deductions, even if you itemize. With that, the low interest rate on the CD versus the mortgage makes it a better idea to pay it off.

    That said, if you do still have a lot remaining on the mortgage and are paying a lot of intest which can be written off on your taxes, that raises a different question: why do you have so much money sitting around in a CD at ~2%? If that is the case, I would keep the mortgage, cash out the CD instead of renewing, and go find a different investent opportunity. There are plenty of very safe, conservative investment options you can find that will do better than 2%.



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    Re: Should I renew my CD or pay off mortgage?

    Quote Originally Posted by cycfan View Post
    I have a CD that is going to automatically renew for 15 months at 1.85% or 5 years at 2.85%. I'm paying 5% on my mortgage. Should I cash the CD and pay the mortgage off? They always say not to do this, but if I'm paying more interest on the mortgage than the CD is making, it seems like a good idea. I guess I would have to figure how much my income tax would go up as there would be no deduction for mortgage interest. Any suggestions?

    GO CYCLONES!!!
    I have a question: Why do you (or anyone for that matter) own a CD? Do you realize after inflation you are actually LOSING money?



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    Re: Should I renew my CD or pay off mortgage?

    If you don't have any plans for that money you have saved up I'd say pay off the mortgage - then you would have all that money you were once spending on monthly mortgage payments that you can reinvest and you would have property that a no bank nor anyone else has legal claim to. It would suck short-term, but in the event something happens to you years from now, at least your family owns the house, so you wouldn't have to worry what would happen to them.


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    Re: Should I renew my CD or pay off mortgage?

    Dave Ramsey would say get out of CDs and pay off the mortgage. If you were to take what you are currently paying on the mortgage and instead pay off any other debt (if you have some) and then invest it, you'll find a better rate.



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    Re: Should I renew my CD or pay off mortgage?

    For sure I would not renew a CD at 2.85% for 5 years. I think it is possible that interest rates may rise considerably over the next 5 years.

    The decision should also be based on whether you have additional investments besides this CD money. If this represents all of your investment money and you put it all on your house, you are taking a bigger risk by putting all of your assets in one class. Ideally, diversifying by having money in real estate, the stock market and fixed investments reduces your risk.



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    Re: Should I renew my CD or pay off mortgage?

    Quote Originally Posted by cycfan View Post
    I have a CD that is going to automatically renew for 15 months at 1.85% or 5 years at 2.85%. I'm paying 5% on my mortgage. Should I cash the CD and pay the mortgage off? They always say not to do this, but if I'm paying more interest on the mortgage than the CD is making, it seems like a good idea. I guess I would have to figure how much my income tax would go up as there would be no deduction for mortgage interest. Any suggestions?

    GO CYCLONES!!!

    You will lose a tax deduction if you pay off your mortgage, plus after you pay off your mortgage however many years from now, you will still have your CD. Think of paying your mortgage, minus the interest of course, as paying yourself. Because it will ultimately come back to and maybe a little more if/when you sell it. I would also suggest you move the money out of the CD and put it in a mutual fund.



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