It's an old fact, but one that still holds true -- a home is the biggest investment that most people make in their lifetimes [source: Sun Sentinel]. And thanks to a cash-wrenching recession and widespread unemployment, many people are paying off debt as quickly as they can, for better financial security and peace of mind. So why not pay off the mortgage as fast as possible, too?
On the surface, it may seem smart to do away with debt entirely. If you're swimming in pools of extra cash, paying off the mortgage can be a great idea.
However, most people aren't doing cannonballs into papery waves of Benjamins, so for the vast majority of homeowners, financial decisions are more complicated. You need to think analytically when considering where to put your money. Although you might save thousands upon thousands of dollars in accumulated interest by paying off mortgage interest, you're missing out on other opportunities that could ultimately help you stash away far more money in the long run.
For starters, your priority should always be to pay off high interest and consumer debt right away. So if you're carrying any sort of credit card debt, you need to finish paying your debts here first. The same goes for a car loan and any other lines of credit.
Then you'll want to make sure you're maximizing the power of easy money. Although generous 401(k) retirement funds are hard to find these days, some companies do still match around 50 percent of every dollar you invest, for up to 6 percent of your pay [source: MSN Money]. That matching is basically free money -- and when you put it away in a 401(k), it's not taxed as part of your income (although you will pay some taxes when you eventually withdraw funds).
You also have to balance retirement saving with emergency fund requirements. Old-school thinking says you need at least six months of savings to live in on case you lose your job. But as the Great Recession drags on, some experts advise having access to two full years' worth of liquid assets, just in case disaster of some kind strikes your family [source: Zillow].
If you're maxing out your retirement funds, have plenty of cushion for emergencies and you still have plenty of extra income, you have a wonderful challenge: deciding where to put all that delicious extra money. Keep reading and you'll see more about whether you should dispose of your mortgage, or whether you can cook up even tastier plans for your cash.