A:

Only you and your financial advisor, family, accountant, etc. can answer the "should I?" question because there are many more factors that aren't in the assumptions you included, and a lot of them relate to your own gut feel.

It would be easy if paying off a mortgage were ONLY just another investment. Then you could decide whether investing in that house is better or worse than putting the money in cash, an income property, gold, the market, bonds, etc. But a home has a lot more aspects, including being one of the biggest "musts" in retirement - after all, you'll need somewhere to live.

If the housing market stays pretty good, you will have parked those funds and saved the interest costs, which are always a nasty way to erode your savings. And you can always access the money again in an emergency with a new mortgage - as long as the bank doesn't discriminate against you on credit as a retiree and the market hasn't fallen apart. Meanwhile, you can also enjoy our home debt free.

Let's split ourselves into three people for a second. Flash forward 23 years. Person 1 did what you're contemplating, and the house is worth more, less or the same, but is still in good shape and there is one less bill to worry about. Person 2 put the money in the market and lost 70% of it, still has the mortgage and doesn't have the cash either. Person 3 bought a second house, fixed it up, sold it for a 50% profit (or bought an apartment, or started a small home business, etc.), still paid off the house and had some nice extra retirement cash or an enjoyable small business. If both Person 2 and 3 sound like a pain, paying of your mortgage may be the right choice for you.

Interest and inflation are both silent retirement killers, and controlling interest should provide peace of mind and be a great return at the savings of 6.5% - minus, perhaps a 3% "guaranteed" opportunity cost and an inflation adjustment.

If you lay out all the factors to your accountant and family, your gut will give you the best direction. Many people who pay off their mortgages feel it's the smartest thing they've ever done. That has to do with how they feel, not a bunch of numbers!

To read more, check out Paying Off Your Mortgage, Understanding The Mortgage Payment Structure and Mortgages: How Much Can You Afford?

RELATED FAQS
  1. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  2. What is after-hours trading? Am I able to trade at this time?

    After-hours trading (AHT) refers to the buying and selling of securities on major exchanges outside of specified regular ... Read Full Answer >>
  3. Do FHA loans require escrow accounts?

    Federal Housing Administration (FHA) loans require escrow accounts for property taxes, homeowners insurance and mortgage ... Read Full Answer >>
  4. Do FHA loans have prepayment penalties?

    Unlike subprime mortgages issued by some conventional commercial lenders, Federal Housing Administration (FHA) loans do not ... Read Full Answer >>
  5. Can FHA loans be refinanced?

    Federal Housing Administration (FHA) loans can be refinanced in several ways. According to the U.S. Department of Housing ... Read Full Answer >>
  6. Can FHA loans be used for investment property?

    Federal Housing Administration (FHA) loans were created to promote homeownership. These loans have lower down payment requirements ... Read Full Answer >>
Related Articles
  1. Options & Futures

    4 Equity Derivatives And How They Work

    Equity derivatives offer retail investors opportunities to benefit from an underlying security without owning the security itself.
  2. Options & Futures

    Five Advantages of Futures Over Options

    Futures have a number of advantages over options such as fixed upfront trading costs, lack of time decay and liquidity.
  3. Term

    What is Pegging?

    Pegging refers to the practice of fixing one country's currency to that of another country. It also describes a practice in which investors avoid purchasing security shares underlying a put option.
  4. Home & Auto

    Understanding Pre-Qualification Vs. Pre-Approval

    Contrary to popular belief, being pre-qualified for a mortgage doesn’t mean you’re pre-approved for a home loan.
  5. Investing Basics

    An Introduction To Structured Products

    Structured products take a traditional security and replace its usual payment features with a non-traditional payoff.
  6. Options & Futures

    Contango Versus Normal Backwardation

    It’s important for both hedgers and speculators to know whether the commodity futures markets are in contango or normal backwardation.
  7. Home & Auto

    6 Reasons To Avoid Private Mortgage Insurance

    Homebuyers who put less than 20% down will likely be forced to secure private mortgage insurance. Here are six reasons to avoid it.
  8. Home & Auto

    10 Tips for Getting a Fair Price on a Home

    When the housing market booms, it's tougher than ever to get a good price. Make sure the house you choose is worth the price you pay.
  9. Your Clients

    Events in 2016 That'll Alter Your Retirement Plans

    Retirement savers who are trying to see what lies ahead can expect these changes affecting their retirement plans in 2016.
  10. Investing Basics

    What Does Contango Mean?

    Contango​ is when the futures price of a commodity is higher than the expected future spot price.
RELATED TERMS
  1. Warrant

    A derivative that confers the right, but not the obligation, ...
  2. Bull Call Spread

    An options strategy that involves purchasing call options at ...
  3. Balloon Payment

    An oversized payment due at the end of a mortgage, commercial ...
  4. Backlog

    A build-up of work that needs to be taken care of. The term "backlog" ...
  5. Board Of Directors - B Of D

    A group of individuals that are elected as, or elected to act ...
  6. Modified Tenure Payment Plan

    A way to receive reverse mortgage proceeds that gives the borrower ...
Hot Definitions
  1. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  2. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  3. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  4. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
  5. Godfather Offer

    An irrefutable takeover offer made to a target company by an acquiring company. Typically, the acquisition price's premium ...
Trading Center