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Thread: Pay off the house or not?

  1. #1
    Senior Member Sarafino's Avatar
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    Pay off the house or not?

    I have a neurodegenerative disorder and am a chair user. I am going to have to file for SSDI this year or the next due to the progression of my disorder. I have hoarded money over the last few years to pay off my house. Now that I have enough to do it I am hesitant. For one, I would be left with about 5K and I am concerned about the time it can take to be approved for SSDI, and the wait period for payments to begin. Am I better of holding onto my money for now, until afterwards? I need to pay off my house so that the meager amount of SSDI will be something possible to live off.
    49 year old female
    married
    chair user since 2009 from a neurological disorder

  2. #2
    You need to sit down and calculate the effect this will have on your income taxes. Do you need the mortgage deduction? The interest deduction can have a significant impact, and may outweigh the additional taxes you will have to pay. SSDI income is taxable as far as I know.

    Will SSDI be your only income or do you get a pension from your work or state disability as well?

    I would be very hesitant to pay off your mortgage completely if this would result in you having only $5K in savings for use in an emergency. Have you looked at refinancing instead???

    (KLD)

  3. #3
    Senior Member Sarafino's Avatar
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    I don't think SSDI is taxable unless you make over 25K a year? I will be getting $1100 a month. I might be able to make a few hundred a month extra. My goal is to be able to live on as little as possible because that approach seems to be the only way I will have an existence. I want to not have to pay taxes at all.
    49 year old female
    married
    chair user since 2009 from a neurological disorder

  4. #4
    How are you going to be "making a few hundred a month extra"?? Be sure to look into this closely. While a disabled person applying for or receiving SSDI cannot earn more than $1,170 per month by working, a person collecting SSDI can have any amount of income from investments, interest, or a spouse's income.

    If you are married and you file jointly, and you and your spouse have more than $32,000 per year in income (including SSDI benefits), a portion of your SSDI benefits are subject to tax. If you are single, and you have more than $25,000 in income per year, a portion of your SSDI benefits will be subject to tax.

    Colorado does NOT exempt SSDI from state income tax (some states do), so you need to consider this as well.

    (KLD)

  5. #5
    It is definitely worth paying a tax attorney or accountant to take a look at your particular situation rather than having any of us shade tree tax experts opine on your particular situation.

  6. #6
    Senior Member djrolling's Avatar
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    I would keep enough to live on for a couple years. Then when disability is in place pay it off if you can. We have three mortgages. Our house and two investment properties. When we had our taxes done this year he missed that we had mortgages and we were going to owe $400. Caught the mistake and with mortgages figured in we got back a little over $400 so there is no big benifit not to pay off the mortgage. We are on point to have our house paid off by the end of 2017, about 9 years early, and then we will tackle the condos. The interest on the house for a year is more than $400. Maybe if you have a really expensive house "maybe" the numbers might come out different but I have my doubts. If you add the interest of all three mortgages together I would be paying around $2000 a year in interest to avoid a $400 tax bill. I am not sure where this thing about not paying off your house to keep your tax deduction started but I doubt it would ever work out to a real savings.... When you do your taxes have them figure it with and then without the deduction and then look at how much you are paying in interest each year. Compare your tax liability without the mortgage deduction and what you pay in interest each year and it will be easy to figure out
    Last edited by djrolling; 04-17-2017 at 10:46 PM.

  7. #7
    I'd pay it off. Your mortgage payment will always be greater than the tax deduction it enables. You don't have to kiss your $5k good bye. It's yours just in a different form. You can create a home equity line of credit through a credit union for about 3.5% to access the $5k you used to pay off your mortgage. As long as the mortgage you eliminate was at an interest rate > 3.5 % you come out ahead. If your mortgage interest rate is less than your HELOC rate, it may still make sense as long aa you pay off the HELOC quickly.

    Just my ideas. Please do your due diligence before acting.

  8. #8
    Senior Member Sarafino's Avatar
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    August, I think you misunderstood. If I pay off my mortgage all I will have left in the world is $5000. I think I should hold on to my money until after I am awarded SSDI. I haven't started the process yet, I am finding it hard to pull the trigger on deciding when the frustration of trying to produce enough art to live on is too much. I don't make very much money these days, all my extras come from a relative who gifts me $10K a year. I didn't plan well for this part of my life, having a degenerative condition I was more focused on having all the adventures I could while I still could. I naively thought my well off family would have 'made financial plans' for me, when in fact that is not the case whatsoever. I am legally separated from my husband for financial reasons as well, mostly to protect my assets from his huge debts. The only debt I have is the small mortgage. I guess what it equates to is early retirement and how to do it, but forced upon me by my condition. I don't even know what kind of financial person to talk to, most seem to go blank the second you get into disabilty benefits. I have an ongoing relationship with our local independent living center too, and after asking and asking no one has ever had any advice for me. It is very frustrating.
    49 year old female
    married
    chair user since 2009 from a neurological disorder

  9. #9
    Senior Member Sarafino's Avatar
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    That is good advice about the credit union, though, thanks!!!!!
    49 year old female
    married
    chair user since 2009 from a neurological disorder

  10. #10
    Senior Member Joe-MN's Avatar
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    You have a house, how old are the major appliances? Like furnace, waterheater, AC, and roof? If any of these are older (10+yrs or so), you may want to keep more ready cash around. How about your car? How many miles? How old? You get the idea. Do you have any expense equipment/appliance that is getting old (art related equip)?

    Let us know what you find out.
    Better to remain silent and be thought a fool, than to speak and remove all doubt.

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