Rustic23
Thinks s/he gets paid by the post
To pay off or not to pay off has been discussed at length on this board, and I am not looking for the 'feels great', not good economic sense debate. Here is the situation:
Texas Property Tax:
In Texas, 65 and over, homesteaded property, can defer their property tax. The deferred tax must be paid within 180 days after death by your estate and there is an 8% simple interest, not compounded, tacked on.
However, most lenders will not allow this option as it places a lean ahead of theirs, so it is necessary to pay off the house in order to defer the taxes. The debt passes to the estate. If the value of the home is not equal to the taxes owed, and the estate has no other assets, it is the county/city/states problem. i.e. they get the home.
For my neighborhood, the tax, after exemptions, is between 2.1 and 2.5 percent of the values on the home. We pay about $7,000 a year on the note, and $7,500 on the taxes. We would have to withdraw $115,000 from IRAs to pay it off.
I think it makes since to pay off the home with a 5.78% note, and defer the taxes. The longer we live the less the effective rate on the taxes, and both my wifes parents lived past 95 and her brother is already pushing 80. Say in 30 years we need a hundred thousand or so to fix up the home. I could go to the county/city/school and ask for some money back, or I could go to the bank and take it out. I am sure the county/city/school would be understanding... right!
To me this seems like a no brainier, yet there are not many people that do it. I tried to create a spread sheet based on a 20 year life to see what compounded interest rate I would have to get on the savings to equal the simple rate. I came up with 6%, however, I am not sure it is right.
So any opinions? Any other over 65 Texans doing this?
Texas Property Tax:
In Texas, 65 and over, homesteaded property, can defer their property tax. The deferred tax must be paid within 180 days after death by your estate and there is an 8% simple interest, not compounded, tacked on.
However, most lenders will not allow this option as it places a lean ahead of theirs, so it is necessary to pay off the house in order to defer the taxes. The debt passes to the estate. If the value of the home is not equal to the taxes owed, and the estate has no other assets, it is the county/city/states problem. i.e. they get the home.
For my neighborhood, the tax, after exemptions, is between 2.1 and 2.5 percent of the values on the home. We pay about $7,000 a year on the note, and $7,500 on the taxes. We would have to withdraw $115,000 from IRAs to pay it off.
I think it makes since to pay off the home with a 5.78% note, and defer the taxes. The longer we live the less the effective rate on the taxes, and both my wifes parents lived past 95 and her brother is already pushing 80. Say in 30 years we need a hundred thousand or so to fix up the home. I could go to the county/city/school and ask for some money back, or I could go to the bank and take it out. I am sure the county/city/school would be understanding... right!
To me this seems like a no brainier, yet there are not many people that do it. I tried to create a spread sheet based on a 20 year life to see what compounded interest rate I would have to get on the savings to equal the simple rate. I came up with 6%, however, I am not sure it is right.
So any opinions? Any other over 65 Texans doing this?
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