Weighing the options of paying off your mortgage early – Lowell Sun

Last time, we talked about whether you should consider paying off your mortgage early. There are additional questions to ask yourself before deciding whether payig down a mortgage is the best way to put the extra money to work or if there are other options that will yield a better return. Let’s examine those questions.

Does your employer retirement plan offer matching funds? If so, are you contributing at least the amount your employer will match? This is “free” money and will grow tax-deferred. You won’t get a better deal anywhere.

Are you carrying high-interest debt? If you are, pay it down as soon as you can. Next to your employer matching funds, virtually no risk-free investment will give you returns to match the interest rate you are paying on these loans.

Do you have a sufficient emergency fund? Make sure you have enough cash reserves you can easily access in case a large unexpected need arises. The goal should be to have about one year of living expenses for a working family. For retirees, a reasonable target is to take the difference between your after-tax income from predictable sources such as Social Security, employer pension and rental income (if applicable) and your after-tax living expenses and multiply that by 2. The rationale…regardless of what happens in the financial markets, you have two years of living expenses “in the bank.”

If you do your homework and weigh the pros and cons carefully, paying off your mortgage could be one of the smartest investments you can make.

This article is for general information purposes only and is not intended to provide specific advice on individual financial, tax, or legal matters. Please consult the appropriate professional concerning your specific situation before making any decisions.

John Spoto is the founder of Sentry Financial Planning in Andover and Danvers. For more information, call 978-475-2533 or visit www.sentryfinancialplanning.com