Virginia CalvinVirginia Calvin

By Virginia

Should you pay yours down faster? Yes! No!

The truth is, it really depends on a lot of different factors, so the answer is different for different people. The simple fact is that if you have an interest rate of 4.5%, paying off extra principal is like EARNING a guaranteed 4.5% on that amount of money, and these days it’s not easy to find a return like that on a small investment.

But then it gets complicated: should you set it up so that your lender draws half of the monthly total out of your account every 2 weeks instead of a full amount once a month? (That will get you one extra payment per year.) Should you do it yourself? Is it better to do this at the beginning of the loan, or in the later years? And what about the impact reducing the principal has on those income tax deductions you’re expecting to take every year for the foreseeable future?

Read this article by Jack Guttentag, finance professor emeritus at the Wharton School at UPenn, for his encouraging take on early payoffs.

And then, check out why Jonathan Fahey for Huffington Post says “Wait a minute!” It may not be in your best interest, ESPECIALLY if you have adequate income and the self-discipline to do something else with the extra money you might otherwise be tempted to give to your mortgage lender every month.

Another option that many of my clients, friends, and family members have wrestled with is whether to get a 15 year loan or a 30 year loan. If you’re considering that now, while we’re seeing advertised rates of as low as 2.75% for 15 year fixed-rate mortgages, I recommend going to and filling out their form to generate their automated evaluation of your situation, and THEIR recommendation. It’s fun to talk to a machine (and it doesn’t require you to enter your email address or commit to anything), and it lets you be honest about what you have in savings, in retirement funds, what your cash flow is like, how soon you hope to retire, and a few other factors that will make a difference in the recommendation.

One couple I know who chose a 15-year mortgage is just getting ready to swap their paid off house for a fabulous house with grounds and a pool in a less expensive state. Another couple ended mortgage payments a while back and bought land outside of Santa Fe. Just for the record, though, the guy in the photo is not one of them!

About virginiac
Paid His Mortgage Off Early