Should I Put Extra $$$ Towards My Mortgage to Pay It Off Early?

I don’t get this question too often, but it’s come up a few times recently: Should I be putting extra money towards my mortgage to pay it off? When is the best timing to do this?

Do This First Before Making Extra Mortgage Payments

My answer is there are only a few circumstances where I can see that this makes sense:

• Investment Planning: You are on-track or beyond with all of your investing goals. Make sure that you have all of your retirement planning in place and you are keeping up with the optimal contributions.
• High Interest Debt Paid Off: You have no other higher interest debt that you could pay off. Look at other types of more expensive debt such as credit cards, cards, etc. Often, it makes sense to put your extra cash towards these payments before the extra mortgage payments. Always pay off higher interest rate debt first – it’s likely that your mortgage is the cheapest debt that you have (even with today’s rates).
• Other Investments: Also, consider other discretionary investments that you might choose to put your money towards, such as bitcoin or alternative options.

Here’s the thing: your house is going to appreciate no matter what, regardless of how much equity you have in house. Appreciation has nothing to do with what you owe against it.

Make sure to have everything else paid off first. If you take the same money you were going to put towards your extra mortgage payment and invested it in something different, then there is a possibility of a higher return. Even if you choose something as simple as a treasury note, the compounding effect of that will add up over time – especially if you have 8 – 10 years or more. You are going to do better putting the money almost anywhere else than paying off the house faster.

Strategy for Your Cash and Investments

Remember that the equity in your house is not liquid (although you can get equity lines or refinancing options if you need to pull the cash in the future, but it’s expensive to make this choice). So, other investments or debt paydowns can have a more impactful benefit on your current and future financial situation.

If you are coming up on retirement, you’ve already met your financial goals, you have extra liquidity and you want to start accelerating your mortgage to get rid of it before retirement – then great! I’m a big proponent of this. But, if you have time on your hands and other priorities, it’s probably better to invest the extra cash instead of paying down your mortgage.

Do you need personalized mortgage recommendations? Then reach out to me any time. I’m here to help!