I would love input on this decision, thank you!
We bought a home in 2001 with a 15 year fixed mortgage. We refinanced in 2003 which added two years to the mortgage, so we have 8 years to go.
We are in our mid-40s and are thinking about how to fund retirement. We have a good chunk of money in a 401(K). We have our own business which is a corporation, so we are able to fund the retirement account from that business with pre-tax dollars. That is a good thing.
We had also been viewing our home as a retirement investment. We bought it for a very good price in 2001, well under market value. It has increased 30% since then. If we hang onto it for another 15-20 years, we could sell it for a very good price and help fund our retirement.
However, in order to pay the mortgage, we have to pay ourselves salary from our business, which then means we have to pay payroll taxes. The payroll taxes are such a massive amount. To give you some real figures - our monthly mortgage is $4500. Our business rents space in our home for a home office, and pays us $1600/month for that space. So that money is pre-tax dollars, paid directly from the corporation to us as rent. The remaining $2900/month has to come to us as salary through our business. In order to get $2900, we have to pay ourselves $4500. Payroll taxes are $2000, and then we get a payroll check of $2900 to pay the remaining portion of the mortgage. I hope that made sense.
This is SOOOO frustrating!!! To have to pay $2000 in payroll taxes each month, just to pay the mortgage. I have talked to our accountant about any other legal ways to avoid this, but of course there are none.
I'm to the point of saying let's just sell this house, pay off the mortgage and move to a smaller home with no mortgage, and then start taking all that money that would have gone to payroll taxes and put it in the retirement account(s).
I'm concerned that I'm missing something here, however... Does anyone see anything else that I should be considering?