Many "financial experts" will tell you that you should not pay off your mortgage because of the great tax benefits. The mortgage companies no doubt have perpetuated that myth. The idea is that for every dollar you spend on mortgage interest you will get back 25 cents (assuming a 25% federal tax bracket). So, you pay $1.00 and get back 25 cents. You are still out the 75 cents ($1.00 - $0.25) in the interest you paid. Would you rather save 25 cents or 75 cents for every dollar spent on interest?  It's a lousy tax benefit, you are essentially getting only a small reduction in your interest rate.

Remember compound interest?  The mortgage companies really have that figured out. Check out your house payment coupon. With a loan of $150,000 at 6.75% for 30 years, you would pay $200,243 in interest in addition to the original $150,000. After 48 months (4 yrs) the monthly payment of $973 still includes $805 in interest or 82.7% (not 6.75%) and the principal balance has only been reduced to $142,906.

The amortized payment schedule has most of the interest at the beginning of the loan, so you pay only a small amount off of the principal. Most households move or re-finance in less than 7 years lured again by lower monthly payments. So they start out again, with all that interest again at the beginning, with the power of compound interest working for the mortgage companies.

With the help of the DebtWealthPlan, the power of compound interest can begin to work for YOU!