By JLP | October 17, 2006
Here’s today’s Question of the Day:
This is one topic that is heavily debated because at issue isn’t just the math, which depending on the mortgage interest rate, makes more sense financially to take as long as you can to pay off the house. However, there’s also the emotional side, which says that the warm, fuzzy feeling you get from having your house paid off early will more than compensate you for the money that it takes from your net worth. My friend, Foobarista, is clearly in the first camp, while FMF likes the emotional side (read the last paragraph of his post).
As for my thoughts: as long as your mortgage rate is less than the rate of return you can get in the stock market, taking as long as possible to pay off your mortgage will add to your net worth IF (and ONLY IF) you invest your extra money in the market (like an index fund). Is this without risk? No, but paying off your mortgage early also isn’t without risk.
Now it is your turn to weigh in. To help you with your decision, try out my calculator.