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Should You Pay Down Your Mortgage?

In Issue:

Graphic of a house balancing coins

Perhaps you have the option to either accelerate your mortgage payments or cough up enough cash to wipe out the entire debt. But just because you can doesn’t necessarily mean you should.

Just shy of one-third of American homeowners own their home outright, according to Zillow Real Estate Research. Many others—perhaps you—have the option to either accelerate their mortgage payments, or cough up enough cash to wipe out the entire debt.

But just because you can doesn’t necessarily mean you should. And that’s especially true if you got your mortgage within the past few years when interest rates have been at historical lows.

“The most curious thing I’ve seen throughout my years in real estate is the number of people who pay down their mortgages, or exchange a 30-year mortgage for a 15-year mortgage, and then take on credit card debt to cover the bills,” says Phil Moore Sr., principal with Moore & Ryan Real Estate, a Pennsylvania firm.

The interest rate on a credit card, Moore points out, is, at a minimum, three to four times the interest rate on a home mortgage—and whereas mortgage interest is typically tax-deductible, credit card interest is not. And so we come to the first of the Big Five questions you need to ask yourself before paying down or paying off your mortgage…

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  • Cathy Harper

    The Money column by Russell Wild (J/F 2014)made some good points but there is a bigger picture. If more people had paid ahead or paid off their mortgage the U.S. may have not have gone through the real estate melt down that we did. Also once a mortgage reaches its midpoint the interest vs principle payments make the tax deduction go away. Also, who
    does not want to save tens of thousands of dollar over the life of a mortgage when you pay down the principle earlier?