Should the Home Mortgage Be Paid Off?

Abstract

Families in the United States have home ownership as a goal. The United States Congress considers home ownership so important that the Federal income tax code allows interest paid on home mortgages to be deducted before computing personal income tax liability. The favorable tax status of mortgage interest led to some financial planners to tell families, "the mortgage should not be paid off since interest expense reduces your tax liability." It is the purpose of this paper to address the questions, "How desirable is a home mortgage?" "How much tax will a family save if they do not pay off the home mortgage?"