What if: You have a real estate property of value $400000, and you have a principal...

What if: You have a real estate property of value $400000, and you have a principal amount left of $200000. You have a surplus of $50000 on your expenses every year, what would you do - pay off $30000 of the principal and invest the rest(bank CD, mutual fund etc) or keep it all in an investment (same CD, mutual fund etc.?). [Paying off the principal will lower your mortgage interest, leading to tax implications with respect to itemized deductions, but you pay off your house faster.]

Expert Solution

It is always wise not to pay off immediately if you get tax benefits based on payment of interest on loan.The interest you are paying on your home loan will help in reducing your tax bill to a great extent

The Balance can anyhow be invested in Bank CD Mutual Fund etc.If you had settled the home loan to reduce the mortgage interest, you will end up paying more tax on return from investments along with your regular income in the long run.You will not get any tax shields.

You need to compute your mortgage interest rate after adjusting tax benefit which will give you actual effective interest rate and Compare it with your tax slab rate and decide accordingly.

Until mortgage loan of $750000 you can deduct the whole of interest you paid for the year to reduce the tax bill .So in this case its better to continue paying mortgage interest when you can claim whole of your interest paid as deduction in your tax bill

ekkarill92 answered 2 years ago

You are looking at investing in a real estate property that youexpect might be worth...

You are looking at investing in a real estate property that you expect might be worth $1,063,009 in 6 years. Based on the risk of the property, you require a return of 11.46%. What is the most you should be willing to pay for it today?

Discuss the distinction between intellectual property and tangible property or real estate. What forms of intellectual...

Discuss the distinction between intellectual property and tangible property or real estate. What forms of intellectual property exist? Locate a high profile legal case (that actually went to court), where a form of intellectual property faced a legal challenge. Give a brief synopsis of the case, including the outcome and what type of damages were awarded, if any.

Assume that you are about to sell property (a vacant parcel of real estate) you own...

Assume that you are about to sell property (a vacant parcel of real estate) you own but otherwise have no use for. The net-of-sales-commission selling price for the property is $460,000. You are willing to finance this transaction over a 21-year period and have told the buyer that you expect an 8% pretax return on the transaction. The buyer has asked you for a payment schedule under several alternatives. Required: 1. What will be your periodic cash receipt, to earn...

Discuss your understanding of determining value for a real estate property using the Sale Comparison Approach,...

Discuss your understanding of determining value for a real estate property using the Sale Comparison Approach, the Cost Approach and the Income Approach from both the residential (personal home) perspective and the commercial investment property perspective.

An investor into the real estate mentioned to you that he/she wishes to purchase a property...

An investor into the real estate mentioned to you that he/she wishes to purchase a property for investment upon his/her graduation in about 3 years time. The property value he/she can afford are in the range of rm300,000. Evaluate the above in the perspective of time value of money.

When buying a house most buyers focus on the real estate and not the real property....

When buying a house most buyers focus on the real estate and not the real property. First what does this mean and how can it create any potential problems.

Real estate Describe the diverse functions and responsibilities of property managers generally, and of specific property...

Real estate Describe the diverse functions and responsibilities of property managers generally, and of specific property management positions relative to Residential, Commercial, and Retail Management.

Nichols is the principal owner of Samuel Nichols, Inc., a real estate firm. Nichols signed an...

Nichols is the principal owner of Samuel Nichols, Inc., a real estate firm. Nichols signed an exclusive brokerage agreement with Molway to find a purchaser for Molway’s property within ninety days. This type of agreement entitles the broker to a commission if the property is sold to any purchaser to whom it is shown during the ninety-day period. Molway tried to cancel the brokerage agreement before the ninety-day term had expired. Nichols had already advertised the property, put up a...

John works for a disclosed principal in securing real estate for business expansion. While working on...

John works for a disclosed principal in securing real estate for business expansion. While working on a purchasing assignment for his employer, John attempts to back out of a deal he signed with a seller. Which of the following is true? The seller may look to either John or his employer to satisfy the contract, depending on the outcome of the sales deal. The seller may look to either John or his employer to satisfy the contract, depending on whether...

Tabitha sells real estate on March 2 of the current year for $350,800. The buyer, Ramona, pays the real estate taxes of $17,540 for the calendar year, which is the real estate property tax year.

Tabitha sells real estate on March 2 of the current year for $350,800. The buyer, Ramona, pays the real estate taxes of $17,540 for the calendar year, which is the real estate property tax year.Round any division to four decimal places and use in subsequent calculations. Round your final answers to the nearest dollar. Assume a 365-day year.a. Determine the real estate taxes apportioned to and deductible by the seller, Tabitha, and the amount of taxes deductible by Ramona.Tabitha: $Ramona:...

Question