Sunset
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.. this uses about 40% (375k) of that to pay off the mortgage. ....
BND - 2.5%*(1-.25) =1.875% post taxes
Pay mortgage @ 3.75% —>> 3% after tax deductions
So, 3%/(1-.25%) = 4% post tax equivalent.
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Out of interest, when you calculated your mortgage deduction, did you adjust it for the portion that has no deduction effect compared to standard deduction ?
Simple example:
Person pays property tax of 10K , and 14K in mortgage interest. So thinks they are "saving" money on the mortgage interest due to the deduction.
However, instead, they could claim the standard deduction of 24.4K, so really the mortgage deduction is totally worthless as is more than replaced by the standard deduction.