Personal Finance: Ask the Experts: Should I pay off my mortgage early?

Personal Finance: Ask the Experts

Get advice on money matters from The Bee's Claudia Buck and a panel of local experts

July 10, 2012

Should I pay off my mortgage early?

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.

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Claudia Buck is The Sacramento Bee's personal finance columnist. Read all her columns here. Contact her at cbuck@sacbee.com

Terri Carpenter

Terri Carpenter offers advice on job hunting, retraining and career counseling. Carpenter works at Sacramento Works Inc., the career and job training arm of the Sacramento Employment and Training Agency (SETA). With 15 years in the field, she has hands-on experience with everyone from first-time job seekers to career professionals seeking advice after a layoff or looking for a mid-career change. Ask her a question.

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