- If you make, say, a $40,000 lump payment to wipe out your mortgage, that's $40,000 you can't invest anywhere else. You won't be paying any more interest on that $40,000, but it won't earn interest as it would in an IRA or stock brokerage account, where in the long run the money may generate more income. If you're determined to pay off debt, zeroing out your credit-card accounts will usually save a lot more, because the interest is higher.
- As the early 21st century showed, the stock market isn't always a sure thing. A mortgage is: If you pay it off 10 years early, it's guaranteed you won't pay 10 years of interest. If your mortgage interest rate was 6 percent, that's the same as 10 years of a guaranteed 6 percent return. It may ultimately depend how close you are to retirement: If you're in your 20s, you can weather a stock market crash and wait for the market to pick back up, which may not be an option in your 60s.
- The money you put into your mortgage is not only unavailable for investing, it's unavailable for emergencies. If paying off the mortgage leaves you without a cushion against disaster, you could end up worse off down the road. On the other hand, with no mortgage payment every month, you have more money to spare for other things, including emergencies. If anything goes wrong, such as a job loss, your savings will also stretch out a lot longer without a mortgage.
- If you itemize your deductions, you can deduct the interest you pay on your mortgage each year. If you pay off your mortgage, that's no longer an option. On the other hand, if you're one of the homeowners who doesn't itemize, you lose nothing by paying it off. And, of course, the money you save on taxes won't usually equal the amount you'll continue paying in interest. If you're in a high tax bracket, however, the deduction might be worth keeping.
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