Ask Money

Pay off the mortgage now–or wait

Chris Farrell Jun 17, 2011

Question: My wife and I are in a seriously enviable position, but we still have a question. We have just over $25K left on our mortgage, and just over that amount saved up in our joint bank accounts. We’ve been absurdly aggressive w/the mortgage already; I’ve calculated that, at our current repayment rate, the mortgage will be paid off within 18 months. But, I’d like to pay the mortgage off with our savings now Now NOW! to get out from under that debt and to save approximately $1800 in projected mortgage interest. My wife floated the idea of paying off half of what’s left of the mortgage so we could have the mortgage paid off within a year. I’m still of a mind to pay off as much as we possibly can while we can (even though we both have stable jobs). We have no other debt. Any advice? Thanks. Nate, Lawrence, KS

Answer: Okay, this is one of those times when you really can’t go wrong.

That said, I like your wife’s approach. The reason is that it gets rid of the mortgage fast and it maintains your household savings safety net just in case.

With so much uncertainty in the economy and all the unexpected expenses that pop up in everyday life I rebel against the idea of completely draining your pot of savings. The approach better protects you from the downside in case of an unforeseen twist of financial fate.

If you’re still not convinced then I would first take an inventory. Look at your car or cars. Are there any major repair bills in the near future? How about the house? And just how secure are your jobs over the next year or two (the time frame it would take you to rebuild savings)? If the answer to questions like these is no major repairs on the horizon and we’re confident about our job security then by all means eliminate the mortgage all at once.

Either way, you’re going to own your home very soon. Congratulations.

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