A reader named Nancy asks, “Is it better for a pastor to be on a 15-year mortgage or a 30-year mortgage (tax-wise and benefit-wise)?”
Great question, Nancy – thanks for asking! I hate to say it, but it really depends!
I’ll give you the best answer I can (over the next few posts), but I recommend that you and all my other readers also seek the advice of a tax professional who can fully understand your personal financial situation.
Which Mortgage is Better for Pastor Housing Allowance – 15-yr or 30-yr?
The answer to this question depends on several factors, including:
- Your taxable income and tax bracket now
- What your taxable income and tax bracket might be from years 15-30
- Your short-term and long-term money goals
- Whether the mortgage interest deduction will still be around over the next 30 years
- Whether the clergy housing allowance exemption will still be allowed over the next 30 years.
In general, you’ll pay a lot more mortgage interest over a 30-year term compared to a15-year, but you’ll “potentially” receive a greater tax benefit because the interest you pay can be included as part of your housing allowance and excluded from your taxable income.
Home Mortgage & Refinance Calculator
I say “potentially” because it all depends on your taxable income and the clergy housing allowance exemption amount that you actually qualify for – not necessarily the amount of housing allowance that the church has declared for you.
In my next post, we’ll do some housing allowance calculations to see how a 15-year mortgage compares with a 30-year mortgage at today’s historic low mortgage interest rates.
Please subscribe to the Money Wise Pastor RSS feed, if you haven’t yet, to get future articles when they are posted.
You might also like: