This might make your dumb question list so here it goes: If a person has 1) a 30 yr. mortgage @ 6.2% with a monthly paymt of $577 and owes $85,000 on the mortgage. 2) has $110,000 in a checking acct. getting 2%. should he pay off the mortgage and be debt free?

That doesn't sounds like a dumb question at all - Clark Howard, where are you? This is your type of question!

Do you want to be free and clear? What about your tax deductions? If you payoff the 85K with cash, then you would only be left with 25K making 2%. It doesn't seem like you are making you money work for you.

How about a refi into a lower interest rate, make double payments (or triple) to chip away at the principle and take the rest and put it into 6month or 12 month CD's that are paying well over the 2%?!?! Sounds like a better plan to me.

I'm sure fellow members would love to chime in on this - great topic!

Troy Topham:

Do you want to be free and clear? What about your tax deductions? I

Hell yes!  And,  hell no!

Why would you want to pay $x in interest to avoid paying <$x in tax?

 

Troy Topham:

How about a refi into a lower interest rate,

And spend a few thousand dollars to do this!That in itself is a 3-4% hit that has to be recouped.

 

Troy Topham:

take the rest and put it into 6month or 12 month CD's that are paying well over the 2%?!?!

Unless you can get at least more than you are paying on your loan, AFTER taking into consideration things that effect your investment returns, such as fees, taxes and inflation, you'll need to earn somewhere close to 10% to realize 7-8%. To me, this is a no brainer, pay off the mortgage. It's a guaranteed 6% return. And don't forget the risk factor. In the current environment, to earn close to 10% entails a lot of risk. 

 

You can always take out a LOC sometime in the future when conditions are better for investment returns.

Of course, if all the money being pumped into the economy does what some fear it will will, a better course of action would be to buy some real assets... an investment property, gold... I've read that the result of the money pumping will be some serious inflation which should be good for real assets.

 

 

Gonna be there forever?(at least till you die?) Have income that will most likely continue?

Pay it off.

Do you have other investments?  How secure is your income?  How long do you plan on being in the home?  What are your goals?