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It may not pay to pay it off early

If you are thinking of paying off your mortgage, or at least using extra money on hand to pay the mortgage off early, a new report may cause you to think twice as this debt aversion may be costing you money in the long run.

This report says you might be forfeiting  ten to fifteen cents per dollar with this strategy. If you don’t itemize tax deductions or if you pay the maximum on your tax free retirement contributions then pay away on your mortgage. But if you are not investing up to your employer’s match in your company’s 401(k) use the extra money there, not in paying down your mortgage.

If you have an ARM or one of the exotic mortgages, then this advice is not applicable. But your first plan should be getting a fixed rate mortgage at the best possible rate, and then use your extra funds to invest to the maximum in retirement plans.

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