With the housing market still struggling, more and more consumers are questioning whether or not they should try to pay off their mortgages early.
Maybe you're part of a young family, and whittling down your loan balance seems like a sound strategy. Or maybe you're counting down to retirement (perhaps even already kicking back), have only a few years of payments left, and are wondering if you should just knock off the balance.
But if you're thinking of such a move, you're also well aware that mortgage interest is tax-deductible -- and if history is any guide, putting money into stocks will earn you a higher return over the long haul than putting it into real estate.
The answers to the questions below can help you determine your best course of action.
Do you have more pressing financial needs?
Anyone who has credit card debt or isn't maxing out her 401(k) should make those the priority. You should also have at least six months' worth of living expenses in cash.
A few years ago you would have been able to pull money out of your home quickly if, say, you lost your job. Now that lenders have tightened up, that's not so easy.
Retirees and near-retirees contemplating a lump-sum payoff need to ensure they have enough liquid savings to handle emergencies such as unexpected medical expenses, especially because it's hard to tap equity on homes without first mortgages.
And you shouldn't pull money out of your IRA to pay off your home loan, since the IRA funds will be taxed at ordinary income rates.