Interest could be seen as rent for use of money

Q: I inherited some money when my grandmother died last winter, and as you wrote in a recent column, it could be a good investment to pay off the mortgage on my house. I wrote to my bank, and they sent me a figure for paying off the mortgage. It’s only a little less than what’s listed as the principal on my other statements from them.

What I don’t understand is, shouldn’t they give me credit for the interest I’ve paid all these years? If I have to pay the whole principal figure, I don’t see that it’s worth doing. — askedith.com

A: Years ago we used the bank’s money to buy houses. Think of interest as a sort of rent you’ve been paying in return for the use of their money. If you moved out of an apartment you wouldn’t expect the landlord to return all the rent you’d paid in the past. You got something in return: the use of the apartment. And the bank won’t return the money you paid in interest.

Part of each monthly mortgage payment has been going toward paying down the debt, which is why the remaining principal is a bit less every month. But that amount is what you owe now.

No single financial move is right for everyone. In some situations, though, paying off a mortgage is a good investment. It’d be like buying the apartment, as there’d be no more need to pay rent.

OUT-OF-STATE LANDLORD

Q: I am responding to a reader’s question about being a landlord out of state. I am a retired military officer. I have sold property out of state, and I have rented homes from thousands of miles away because I either couldn’t sell them or I was going to return to them later.

I would never consider handling these things myself! I paid professional Realtors to handle everything. They would call and discuss their choice of tenants with me, but they screened and chose the tenants, collected and banked the money for me, and also arranged the repairs.

There were house rental managers everywhere except Minneapolis, Minnesota. I got by there, but it was not nearly as successful as renting my homes in Texas and Florida, where professionals handled the entire process. — askedith.com

A: Thanks for sharing your experience. Professional property managers reading this will appreciate your kind words. There are surely some in Minneapolis. Too bad you never located them.