Thursday , 26 April 2018


4 Money Moves to Make After You Pay Off Your Mortgage

Congratulations! Paying off your mortgage is a huge accomplishment, one thatreal-estate2 many people only dream about. Go ahead and celebrate…but once the celebrations die down, there’s a little more work to do in order to properly navigate your new post-mortgage life. The following four steps should help.

The original article has been edited here for length (…) and clarity ([ ]) by munKNEE.com – A Site For Sore Eyes & Inquisitive Minds – to provide a fast & easy read.

1. Re-estimate your income taxes

If you’ve been itemizing income tax deductions on Schedule A, including your mortgage interest, you may assume that paying off your house will lead to a higher tax bill. Maybe, but maybe not.

New tax laws that went into effect this year include much higher standard deductions — $12,000 for singles (up from $6,350) and $24,000 for married couples filing jointly (up from $12,700). So, depending on how much you were paying in mortgage interest, you may not even have to itemize anymore to get the same or higher deductions. On the other hand, personal exemptions have been eliminated.

The only way to find out for sure how becoming mortgage-free will impact your income tax liability, especially in light of the new tax code, is to run some numbers, perhaps with the help of a tax software package or by asking your accountant. Then, make sure the proper amount of income tax is being withheld from your paycheck. (See also: 12 Things You Should Know About the New Tax Law)

2. Redirect your bills

If you had been paying your property taxes and homeowners insurance premiums as part of your mortgage payment, you’ll need to make sure those bills start coming directly to you. Your mortgage company may have made the proper notifications for your tax bill (although it’s worth double checking), but you’ll probably need to notify your homeowners insurance company yourself.

3. Remember to save for insurance and property taxes

If the previous scenario describes your situation — you used to pay your taxes and insurance as part of your mortgage payment — it’s important to start saving for those expenses each month…

What to do? Calculate one-twelfth the annual cost of your property taxes and homeowners insurance and transfer those amounts to a dedicated savings account each month, preferably automatically. That way, the money will be there when you need it.

Don’t assume this money will just build up in your checking account since you’re no longer making your tax and insurance payments along with your mortgage. Chances are, it won’t. Mingled money tends to leak. Far better to put this money away in a separate savings account.

4. Redo your budget

Paying off your mortgage should give a nice boost to your monthly cash flow. Sure, you’ll continue to have plenty of home-related expenses…and you’ll need to see how your income taxes will be impacted. Still, no longer having a mortgage payment will put more money at your disposal — probably quite a bit more.

As is true when getting an inheritance or a large income tax refund, it’s essential to plan ahead. Otherwise, you could easily find yourself at the effect of Parkinson’s law: Expenses rise to meet income so think about your financial priorities.

  • Could you wipe out other debts, such as student loans, by using some of your new cash flow to make accelerated payments?
  • Should you direct some of the money toward your emergency fund, retirement savings, or your kids’ college funds?
  • Are there any expensive repairs or replacements you should be saving for?

It’s fine to allocate some of your increased spending money for fun things, too, such as entertainment or vacations but that spending will be more enjoyable if you first direct some of your new cash flow toward paying off other debts or building savings.

Again, congrats on becoming mortgage-free. Taking the steps described above should make the good feelings you’re experiencing last well into the future.

Scroll to very bottom of page & add your comments on this article. We want to share what you have to say!

Related Articles From the munKNEE Vault:

1. Cities Where Real Estate Prices (Values) Will Drop 25-50% in 2018!

Real estate ‘values’ will drop 50% in cities such as Toronto, Vancouver and San Francisco and 25% in many other cities around the world. Here’s why.

2. Mortgage Interest Deductibility Should Be Eliminated! Here’s Why

“Buy as much house as you can,” real estate agents urged clients. “The more you buy, the bigger your tax break” is their advice using the mortgage interest deduction (MID) to explicitly promote over-investment in housing. Unfortunately, such advice fueled the previous housing boom and exacerbated its bust and could do so again.

3. What’s Coming? Definitions Of A Real Estate Correction, Crash & Capitulation

If you’re from Canada and the U.S., chances are you’ll never see market capitulation. However, you’ll likely see many corrections, and maybe even a couple of crashes. Here are the definitions of the meanings of the words: correction. crash and capitulation.

4. Your House: A Home, An Investment or a Ponzi Scheme?

In the past few decades, the concept of home ownership has been completely turned on its head. Previously, homes were considered a very long-term consumption good…[No one] ever considered tripling the value of their homes by retirement time and selling them to move beachside yet, somehow along the way, this became a reasonable investment expectation. Even today, home buyers still make their purchases with the hopes of escalating prices. [It begs answers to these questions: Is a house just a home? Should a house be expected to behave like an investment? Is the housing game nothing more than a Ponzi scheme where the end buyer before the market corrects becomes the “greater fool”? Let’s try and answer those questions.]

5. How Much Can You Expect Your House To Appreciate By Each Year? You’ll Be Surprised – and Disappointed

If you’re like most Americans your house is the largest component of your net worth, and, naturally, you would like to see it go up – but by how much? This article provides the surprising – and disappointing – answer.

6. Pay Off Your Mortgage In Half The Time! Here’s How

In this article I highlight 10 ways to pay off your house early. You can pick out the one that suits you best, or find a way to combine multiple tips to pay off your mortgage in as little as half the time! Imagine not having a mortgage payment any longer. What would that enable you to do?…What are you waiting for?

7. 3.1 Million Homes Owe More On Their Mortgage Than Their Home Is Worth

The number of homes with negative equity in the U.S. is still high, but the numbers are improving. At the end of the first quarter in 2017, 3.1 million homes owed more on their mortgage than the home was worth. This number improved from the previous quarter, with 91,000 homes regaining equity. The total number of mortgages underwater in the U.S.

8. Buying A House Today Will Turn Out To Be A Ruinous Experience In 5 Years Time – Here’s Why

The world will soon realise that all the assets that have been inflated to bubble levels will lose most of their value. Indeed, if we look at what could happen to house prices in real money (gold), the risk is such that buying a house today is likely to be a very costly and perhaps ruining experience.

9. Housing: Is It A Good Inflation Hedge?

Over long periods the inflation-adjusted price of homes in the U.S. has tended to increase by a little more than 1% per year. That doesn’t mean owning a home is a good way to make a 1% real return on your money though. This article explains why.

For all the latest – and best – financial articles sign up (in the top right corner) for your free bi-weekly Market Intelligence Report newsletter (see sample here) or visit our Facebook page.

Leave a Reply

Your email address will not be published. Required fields are marked *