Ask the Expert: 'Should I Pay Off My Mortgage Early?'
Many of you have opened up about your own financial regrets and successes, and we appreciate your candor. So, let's keep the dialog going. Here's a video response to one of the topics raised:
Should I Pay Off My Mortgage Faster?
Ed asks: I am 57 years old with a couple more years to work before I retire. I currently have an equity mortgage on my home with $30,000. The house payment is less than $100 a month. I pay $1,100 a month toward the loan. Here is my question. Should I be paying minimal on my mortgage and putting the rest in my 401(k) and hopefully make money on that money, or would you pay the house off by continuing to pay the accelerated payment to get it paid off as quickly as possible? What is my smartest move? I think I know, but want to hear a professional's point of view.
Regina replies: Sounds like you are in an enviable position -- hats off to you. If you're on the tail end of your loan and the interest rate tax deductions are not a big factor, you could pay off the house if it would give you peace of mind. The downside is if you needed to get out of the house for any reason, you would have all your money tied up in the property, and we know the current real estate market is rough. Financially, if you can pay the more modest mortgage and contribute to a 401(k), that seems like a smart move. You could also do both -- put $500 extra toward the mortgage and $500 in the 401(k). There's no right or wrong answer on this one if you are otherwise debt-free.
Colleen (a commenter) asks: How can you logically answer that question without knowing what interest rate he is paying on that loan? It could be 9% for all you know.