To Pay Or Not To Pay (Off) - Your Mortgage

Like rent vs. buy, the classic question of whether to pay off your mortgage or invest the money has been debated ad infinitum. What is funny is most of the time the financial advisers are suggesting you should invest (especially with low interest rates) while normal folks (like me) usually opt to pay off a little more and avoid the interest. Morningstar writer Christine Benz suggests that aggressively paying off your debt may not be a bad idea, considering “lower return projections [on potential investment alternatives to paying down your mortgage] make it hard to argue that any debt can reasonably be considered good debt.” There was a discussion in the comments section of a previous article where we went over these same exact points.

The article lists six questions you have to ask yourself before you decide:

I have a longer time horizon, which is a point for not paying down my mortgage because I can pick riskier investments. I’m also taking advantage of my tax-sheltered options and so that’s a point for paying down the mortgage faster (if I wasn’t, I’d put that money in a Roth IRA). My interest deduction is not significant but not high enough to give me a reason not to feel pressure about paying all this interest. I have no PMI, so no rush to get to a debt-to-value ratio to a point where I can cancel it. Finally, my interest rate is fixed so I have no rush to pay down the principal before it is adjusted.

Overall, according to those questions, I have actual reason to pay it off sooner but not a lot of reasons not to pay it off. I’ll be sticking with my previous strategy of paying off the higher second fixed mortgage and then reassessing my options after it’s been paid in full.