From his latest newsletter...

"It is wise to keep my home mortgage to get the tax deduction."
WRONG! If you've listened to me for any amount of time, you know I strongly encourage people to pay off their mortgage so they have their entire income to use for wealth building. (This is, of course, AFTER you've paid off all your other debts, have an emergency fund, and started investing for retirement and your children's college funds.) But when I talk about paying off the mortgage, I almost always hear from someone touting the tax deduction.
Let's do the math. If you have a home with a payment of $900, and the interest portion is $830 per month, you have paid around $10,000 in interest that year, which creates a tax deduction. If, instead, you have a debt-free home, you would in fact lose the tax deduction, so the myth says keep your home mortgaged because of tax advantages.

If you don't have a $10,000 tax deduction and you're in a 30% tax bracket, you will have to pay $3,000 in taxes on that $10,000. According to the math, we should send $10,000 in interest to the bank so we don't have to send $3,000 in taxes to the IRS. Personally, I think I will live debt-free and not make a $10,000 trade for $3,000.

This was really good! I really like him!

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i agree most years we don't have enough deductions to get the itemized rate we usually end up with the standard deduction because we don't have daycare to deduct plus most years my kids have been healthy so we have not had the 7% worth of medical to deduct anyway.

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Funny...this subject was brought up about a year ago on this board and I'm just curious as to what the ladies think about paying down mortgages now. Here in So. CA, a lot of people who got ARM loans can't even afford their current mortgage much less any extra.

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I don't always agree with Dave Ramsey on the importance of paying down the mortgage but it has nothing to do with the tax deduction. I agree with him when he says that the tax advantages are minimal. Still, I hate to see people so caught up with the notion of being debt-free that they miss out on other opportunities to save as well as putting other important priorities first such as retirement and building up a healthy nest egg or cash reserve.

Paying off your mortgage early instead of investing leaves your money less liquid – and you are left with fewer options. If you were to lose your job, would you rather have liquid cash at your disposal, or equity in your home? In order to access your equity, you’d have to take out a loan. That’s like spending money to access what you've already paid in.

When you SHOULD pay your mortgage down:
If you need to get away from paying PMI (Private mortgage insurance) you should pay down at least to the point where PMI goes away (about 20% of your mortgage)
If you’re nearing retirement and will need to free up your cash flow within the next 5-10 years

You SHOULDN’T pay down your mortgage early when:
You don’t have a healthy retirement fund in place
You don’t have 6-12 months of living expenses in reserve
You don’t have adequate life insurance and disability insurance for both spouses

If you have a healthy retirement fund, a sizeable emergency fund, are properly insured, then go for it. Still, I think you’re better off investing when you’re young and have a mortgage less than 6% and have sufficient time to weather the market.

Here are more resources:
http://www.usatoday.com/money/perfi/housing/2006-01-26-mym-mortgage_x.htm
http://newsblaze.com/story/20060730174105nnnn.np/topstory.html

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Kim, if you read the quote from DR - he states that "This is, of course, AFTER you've paid off all your other debts, have an emergency fund, and started investing for retirement and your children's college funds". He is not talking here about the baby emergency fund but rather the full 3-6mo emergency fund. He states this in his books too. Have you read his books?

I still think that for young people many years away from retirement who have a fixed mortgage under 6%, it makes more financial sense to invest extra money.

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I agree with his stance on paying off the mortgage once you have emergency funds, retirement, etc. built up and going, but my problem is how do you do it? All our extra goes towards these things. We don't have any debt other than one car payment and mortgage. How do we pay these off quicker when we don't have any "extra"? That's always been my problem with him. We do pay an extra $100 each month on our mortgage and that's cutting off a few years, but where are we suppose to come up with the funds to pay it off in less than ten? If we stop putting into the emergency fund and retirement, it'll still take us 5-10 years to pay off both the car and mortgage and then how much will our emergency funds be worth? How much will we have lost for retirement? Does anyone understand what I'm asking?

I think you have to prioritize your debt paydown. We're doing this right now as part of the FTJ project. Here is more information:
Step #29: Prioritize Paydowns

If I were you, I'd pay off your car before you even think of paying off your mortage early.

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Totally!! I so want to start paying off more of our mortgage, but we have repairs to make on the house that NEED to be done in the next couple of years (roof, new siding) and then we need to raise what we are putting into retirement before we start paying more on the house. So I keep looking at more ways to make some extra money as well as getting to work on these projects so that then we can put extra on the house. Right now we aren't doing any extra...

Are you also saving for paying cash for your next vehicle?

Sorry. Dave says to have no consumer debt at all when you are paying extra on house. This means no CC and no vehicle payments. I missed this in your earlier post. I recommend getting his book from the library.