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. Credit & Loans

    What is an Alt-A Mortgage?

    Called "liar loans" for their low documentation requirements, Alt-A mortgages were hot until the subprime crisis. Now Wall Street wants to bring them back.
  2. Credit & Loans

    New Rules May Make It Easier to Get a Mortgage

    Fannie Mae and Freddie Mac have come to terms with lenders on how to solve mortgage disputes. This could be good news for people with lower credit ratings.
  3. Retirement

    Roth IRAs Tutorial

    This comprehensive guide goes through what a Roth IRA is and how to set one up, contribute to it and withdraw from it.
  4. Retirement

    Best Mortgage Companies Friendly to Retirees

    If you’re no longer in the workforce and need a loan to buy a home, which companies are the most welcoming? Plus, good news about qualifying for a loan.
  5. Term

    How Traditional IRAs Work

    A traditional IRA is a tax-advantaged retirement account that includes stocks, bonds, mutual funds and other investments.
  6. Credit & Loans

    Don't Get Overcharged for Your Mortgage

    Don't pay more for a mortgage than necessary. Here’s a quick look at the different categories and how to be sure you're getting the best deal.
  7. Home & Auto

    Rent-To-Own Homes: How The Process Works

    A rent-to-own agreement can benefit homebuyers with bad credit or insufficient funds for a down payment. Here’s how one works.
  8. Options & Futures

    What Does Quadruple Witching Mean?

    In a financial context, quadruple witching refers to the day on which contracts for stock index futures, index options, and single stock futures expire.
  9. Home & Auto

    7 Must-Have Real Estate Contract Conditions

    Buying a home can bury you in paperwork. But it’s worth your time to make sure your contract contains these seven important conditions.
  10. 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.
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. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  2. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  3. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  4. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  5. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center