From the Mailbag

Miata,

Should I pay extra on my mortgage? I’m making a little extra money right now and I’m thinking paying off my house is a good idea.

 

– Jon

Hi Jon,

This is an intensely personal question. Certainly, less debt is always a step in the right direction, but there might be better choices to grow your net worth more quickly.

Here are a few areas to think about before tackling extra mortgage payments:

  • Is your credit card debt paid down? If not, this is a greater priority. Credit card debt is more harmful to your credit score and is usually at a higher interest rate.
  • Do you have an emergency fund? If not, put extra money into a savings account so that if you have financial trouble down the road, you’ll have funds available.
  • Are your long term goals met? If you’re saving enough for retirement, college or other priorities, then pay down your mortgage.

A mortgage is tax deductible, low interest debt in most cases. Because money paid into a mortgage can’t be used for other goals, I usually look toward other options before paying it down.

2012-03-13T08:00:28+00:00