Q. Hello, I bought a house in 2006 for $1.1 million. I put down $850,000 and now have a mortgage of about $230,000. My house is probably now worth about $750-800,000. Should I work on paying it off, or just make the payments on this 30-year loan? I am retired and plan to be here about10-15 years. Thank you! Mick - Sacramento
A. The decision to pay off your existing mortgage early should be based on a number of factors, including:
• Your ability to sustain your desired lifestyle throughout your retirement years, if you use your savings to pay off the mortgage earlier. Don't forget to give yourself a cushion for life's inevitable financial surprises.
• The interest rate you are paying on your mortgage. If your current interest rate is high, e.g., greater than 5%, or variable, and you are unable to refinance, it might make sense to pay off the mortgage earlier.
• Your tax bracket, i.e., how beneficial is the mortgage interest deduction to you.
• Psychologically, how important is it for you to not have a mortgage. Some folks derive a significant amount of satisfaction in having no debt, while for others; it's not a big concern.
Since you plan to live in your home for the next 10-15 years, the current market value is not that important in making this decision, i.e., your home value should recover by the time you are ready to sell.