Many years ago, my wife and I hosted a neighborhood get together at our house.

It was our first home, on which we closed at a time of great financial instability. The prime lending rate had climbed to an unprecedented 21.5% in December 1980. And, although the rate that we ended up paying for our mortgage — 15.375% — is inconceivable by today’s standard, we were nevertheless pleased to secure what was, at that time, considered a cut-rate deal.

As you might expect, we actively monitored the money markets from that point on, with the intention of refinancing our mortgage when rates declined enough to justify doing so.

Unfortunately, double-digit interest persisted for several more years, and we ended up moving at about the time refinancing would have made sense.

Back to the party.

Because our street was a relatively new one, most of our neighbors were in the same boat as my wife and I were with regard to the high interest rates that we were all paying on our mortgages. So it should come as no surprise that we spent a lot of time commiserating about that.

As a finance guy, the thing I found particularly interesting was the talk about the value of the tax deduction for that interest.

Case in point, one neighbor raised the notion of accelerating his mortgage payments (by adding a meaningful amount to each monthly installment) so his own high-priced debt could be retired significantly ahead of schedule. Several neighbors ridiculed his idea. “That makes no sense,” one said. “Why would you give up the tax deduction?”

Fast forward to today.

Mortgage rates have been so low for so long that opinions on prepaying debts are as divided now as they were then, for the opposite reason. Some advocate for keeping this remarkably low-rate financing in place — even when the borrower has the wherewithal to pay off his loan — while others believe less is more when it comes to debt.

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Mitchell D. Weiss

Mitchell D. Weiss is an experienced financial services industry executive and entrepreneur. He is an Executive-in-Residence at the University of Hartford, co-founder of the university’s Center for Personal Financial Responsibility and adjunct faculty at Rutgers University as well. His books include Life Happens: A Practical Course on Personal Finance from College to Career, Business Happens: A Practical Guide to Entrepreneurial Finance for Small Businesses and Professional Practices and Practical Finance: A Straightforward Guide to Personal and Entrepreneurial Finance, all of which are undergraduate courses that he teaches at the aforementioned schools and elsewhere.
Mitchell D. Weiss