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We have received promotions from our are in the 15 percent tax bracket, so that means for
lender encouraging us to change from a every dollar you pay in interest, you get 15 cents
monthly to a biweekly mortgage payment. back on your taxes. But you’re still paying 85 cents
The justification is that we can shorten the on an after-tax basis. Everyone seems to gloss over
length of our loan by roughly 15 percent that point.
and save a tremendous amount of interest. There’s another important reason I think you’re
The math seems to work over time, but I’ve better off not having a mortgage, and it has nothing
learned that there are no free rides. What is to do with finances. For a single woman, let alone a
the lender getting out of this, and is it really single mom, the sense of security is priceless. And
a good deal for the consumer? there is no bigger feeling of security than to know
Robert B. Barnes, Scottsdale, AZ you have your home completely paid off. It is all
yours. No one can ever take it away from you.
What the lender is trying to sell you is a biweekly So, yes, if you plan on staying in this home for
mortgage-payment program. Your regular monthly the rest of your life, I say you’re in great shape not
mortgage is divided into two payments that you having a mortgage payment. Go for it. Get that
make every two weeks. By speeding up your pay- mortgage paid off. And listen to your heart, not all
ments you will cut a 30-year fixed-rate mortgage the people who will tell you that you are nuts to give
charging 6 percent interest down to 24. 7 years. That’s up the mortgage interest deduction.
nearly six years of savings! The most important investment a single mom
But there is a better way to accomplish the same can make is to make you and your children feel
exact result. secure. A paid-off mortgage is a great plan.
Banks are willing to offer this payment plan be-
cause they will charge you a setup fee of anywhere I am 62 and a retired widow. My income is
from $300 to $500. Many banks also collect $3 to $5 about $2,000 per month. I have $342,000 in
with each biweekly payment. That’s $60 a year for 25 tax-deferred retirement funds. When can I
years. I’d rather see you invest that money. start withdrawals on my IRAs, and how much
To do this for free, all you need to do is send in can I reasonably withdraw per year? I have
one extra mortgage payment a year. This can be no other means of support and don’t want
done in 12 installments. The easiest way is to take to exhaust my savings prematurely, but would
your monthly mortgage and divide by 12. That’s like to plan for my withdrawals.
how much extra money you want to add to each Carole S., via e-mail
monthly payment. If your monthly mortgage is
Payment programs may
take you for a ride
KIE TH LATHROP
$1,000, you would send in an extra $83 a month Carole, I have great news for you. You can begin
($1,000 divided by 12). to take withdrawals from your IRA right now. The
Pretty painless, eh? And I charge absolutely noth- magic age you had to pass was 591/2. Because you are
ing for telling you how to do it on your own. 62, you will not have to pay any penalty for an
“early” withdrawal. But you still have to pay taxes on
I’m 45 and a single mom. I make maximum any amount that you take out—there’s no way
contributions to my Roth IRA and 401(k). around that.
I own my house (valued at $350,000). I’m in How prudent is it for you to withdraw? If you
a 15 percent tax bracket. Is it wise not to have play it conservatively and invest the $342,000 in high-
a mortgage? quality individual bonds, even at just 4 percent, you
Donna Varnmoos, via e-mail could get an extra $1,100 a month before taxes with-
out having to touch the principal. That sounds like
The conventional advice is that a mortgage is it could more than do the trick for you.
great to keep because it gives you a great tax break: But remember, since all the money you with-
Your interest payments are tax deductible. draw is taxable, it could have an effect on whether
But in your situation you should pay off the you pay taxes on your current Social Security pay-
mortgage. First, let’s talk about the tax break. It is ments or not. Take that into consideration when
merely a deduction that is tied to your tax rate. You deciding how much to withdraw. C