Good to Pay Loan Off?

This letter is in response to the Speaking Out column contributed by professional financial planner Stanley L. Klein “Paying Down Mortgage Debt to Save on Interest Adds Up to a Bad Deal” (May 3).

Klein criticizes the investment wisdom of paying down a mortgage, noting that an 8.5% mortgages is 5.5% in real terms after taxes. He then derides that risk-free return as “laughable,” while neglecting to mention that profits on investment instruments (which can surely be purchased through him) are taxable and carry risk. Does he offer a risk-free, after-tax investment that pays a higher rate? And regarding tax deductions, when is it ever a good deal paying $1 to receive a combined state and federal write-off of 37 cents (not just once, but year after year)?

The only time it doesn’t make sense to pay down your mortgage is when your money can be invested at a higher real rate elsewhere (a tough order in 1992). The only variables are liquidity and risk.

The conclusion to be reached after reading this column is that Klein is desperately and unsuccessfully trying to sell products that can’t compete with the risk-free return of paying down mortgage debt.

JOHN CROWLEY

Redondo Beach