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Bank of America Corp (BAC), Wells Fargo & Co (WFC) – Five Questions to Help You Decide: Pay Off the Mortgage Now or Not?

4. Do you benefit from the mortgage-interest deduction?
If nothing else, the past few years have taught a lot of Americans that owning a home simply isn’t all that it was purportedly cracked up to be. I could go through a laundry list of statistics about foreclosures and underwater homeowners to demonstrate the point, but I suspect that doing so isn’t necessary.

That being said, for those with the means to do so, there is one clear advantage: the mortgage-interest deduction. A relic from pre-1986 tax law, when all interest on personal loans was deductible, this provision allows taxpayers to write off the mortgage interest they pay each year on up to $1 million in mortgage debt. For those of you in a high tax bracket, and depending on how much of your monthly payments are attributable to interest, giving this up could amount to a sizable monetary sacrifice.

My recommendation? Check how much you saved in taxes last year to determine whether giving this opportunity up is worth it or not.

5. Will you sleep better at night?
At the end of the day, what ultimately matters is your happiness. If paying off your mortgage will make you feel better about life and give you peace of mind, then, by all means, that’s what you should do. To be sure, the companies on the other side of the transaction, such as Ocwen Financial Corp (NYSE:OCN) and Nationstar Mortgage Holdings Inc (NYSE:NSM) Holdings, aren’t looking out for your best interests and, in fact, would probably prefer that you not make your payments on time, as that increases their fees.

I’ll be the first to admit that this decision amounts to more than just money or a simple mathematical calculation. It is, in a sense, the ultimate realization of the American dream.

At the same time, however, as we’ve learned over the past few years, ignoring the math can turn that dream into a nightmare. Thus, to channel Comcast Corporation (NASDAQ:CMCSA)‘s recent string of popular television commercials: Don’t turn your dream into a nightmare. Do the math.

The article 5 Questions to Help You Decide: Pay Off the Mortgage Now or Not? originally appeared on Fool.com and is written by John Maxfield.

John Maxfield owns shares of Bank of America. The Motley Fool recommends and owns shares of Bank of America and Wells Fargo.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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