There's no sense in downplaying the psychological factor of owning your home free and clear. In an era when foreclosures are common and many mortgages are underwater (when the house is worth less than what you owe on it), having sole ownership of your biggest investment is undoubtedly a good feeling. But other priorities might very well come first.
Sure, you could pay off your home and save on interest in the long term, but there's a good probability your money can do more. Consider this: The interest rate on your home mortgage is likely the lowest you'll pay on a loan -- ever. What's more, the interest you do pay is frequently tax deductible.
There's also the significant matter of financial flexibility. Once you own a home and the bank is out of the picture, you're on the hook for the full value of that property. So if life circumstances demand a quick move during a time when house sales are ugly, you might actually wind up losing money on the deal.
You should also think about putting more money into insurance. Do you have enough life insurance to safeguard your family's future, sans your income?
The same goes for health and disability insurance. If you get hurt or sick and can't work, you can wind up with the kind of debt that only lottery winnings can save you from. Less than one-third of American workers invest in long-term disability insurance. But between the ages of 30 and 65, you have about a 50 percent chance of incurring health problems so disabling that you won't be able to work for three months or even longer [source: MSN Money].
If you're fortunate enough to ponder the idea of paying off your mortgage early, you still have to weigh the benefits and drawbacks of doing so. Perhaps the biggest benefit is peace of mind. With the bank off your back and your house officially on your own books, you'll never have to worry about making another mortgage payment.
Paying off a mortgage sometimes makes sense for those near retirement age. You'll certainly have to pull less from your investments each month for your living expenses, which can ease your mind in old age.
If you're still not sure whether to pay down your mortgage early, and you're clueless on where to best invest your cash, consider calling up a financial consultant or money manager. They can help you dissect your financial statements, pick priorities and guide you gently in a direction that's best suited for your life needs.
More Great Links
- Bischoff, Bill. "Should You Pay Down Your Mortgage Faster?" Smartmoney.com. Sep. 15, 2010. http://www.smartmoney.com/taxes/income/should-you-pay-down-your-mortgage-faster/
- Brokamp, Robert. "Should You Pay off Your Mortgage Early?" Getrichslowly.org. Dec. 1, 2010. http://www.getrichslowly.org/blog/2010/12/01/should-you-pay-off-your-mortgage-early/
- Haggerty, Maryann. "Paying off Your Mortgage Early." NYtimes.com. Jun. 16, 2011. http://www.nytimes.com/2011/06/19/realestate/paying-off-your-mortgage-early-mortgages.html
- Lewis, Regina. "Ask the Expert: 'Should I Pay off my Mortgage Early?'" Dailyfinance.com. Jul. 12, 2011. http://www.dailyfinance.com/2011/07/12/ask-the-expert-should-i-pay-off-my-mortgage-early/
- McHood, Justin. "Should You Pay off Your Mortgage Early?" Zillow.com. Jul. 6, 2011. http://www.zillow.com/blog/2011-07-06/should-you-pay-off-your-mortgage-early/
- Waggoner, John. "Should You Pay off Your Mortgage? Maybe Not." Usatoday.com. Apr. 22, 2005. http://www.usatoday.com/money/perfi/columnist/waggon/2005-04-21-mortgage_x.htm
- Weston, Liz Pulliam. "Don't Rush to Pay off that Mortgage." Money.MSN.com. Sept. 30, 2010. http://money.msn.com/home-loans/do-not-rush-to-pay-off-that-mortgage-weston.aspx?page=2