Is it better to make extra payments to pay off my mortgage early or invest the extra money?

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While the thought of no longer having a mortgage payment may seem attractive, it may not be the best financial move you can make.  If your mortgage rate is locked in at, say, less than 7 percent, it is possible that you'll make a higher return on your money in the long run if you invest it. 

Don't forget, you also have the tax benefits of home ownership to consider.  For example, mortgage interest is tax-deductible in most cases.  A good tip is to add up your itemized deductions and if the total you get is less than the standard deduction amount, then paying off your mortage may be a good bet since you'll save the mortgage interest you're now paying.  Not only that, you eliminate the monthly mortgage payment so you can increase your tax-deductible contributions. 

Some experts advise that you should fully fund your tax-deferred accounts (such as an IRA or 401(k)) first before making extra payments toward your mortgage.  Be sure to have an emergency fund of at least a few months' expenses, too.  And pay off any non-deductible consumer debt (such as credit cards or car loans) before making extra payments to pay off your mortgage early.


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Can I pay my mortgage off ahead of schedule?
KBID 1076
Date Modified 10/24/2011
Date Created 10/29/2010

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