I used an online amortization and compound interest calculator to see with a 6% return and an 8% interest rate (which according to the article ends up being 6% after tax deductions). If you pay down and end your mortgage say, 10 years early, you do end up with more money invested (assuming the market stays true) than you would have saved in interest.

But then I thought, now I’ve got 10 years without a mortgage…what can I do with THAT money? Invest it! So I invest my mortgage payment for 10 years, figure in extra taxes I must pay, and with the same return plus the interest I save you actually come out ahead at the end of 30 years.

For the same reason you’d go to a doctor or lawyer for certain things, or hire a carpenter for that matter. Some matters are more complex than our knowledge-base. Or, even if they are not too complex, we simply do not have the time or resources to climb the learning curve and develop the expertise on our own.

My earlier point was that ultimately you have to be the arbiter between all the professionals you hire. You have to learn enough about the subject to be able to select good professionals, and filter their opinions thru your own judgement. They all come with a point of view, often shaped by their professional training. The carpenter may want to do it his way, the way he was trained to do it, but you might want something asthetically different. So, it is with doctors, lawyers, and planners.

I argue with my own planner constantly. We debate various strategies. I don’t take her word as gospel, because she’s only human. She doesn’t have all the answers (even if she thinks she does). But, she is still a valuable resource.

That being said, I’ll have to take any financial planner’s advice with a grain of salt. Which makes me think, “Why do I need a financial planner in the first place?”

The majority of the people out there would be best suited with an extremely simple savings strategy. Scott Adams outlined it in his unified theory of everything financial.

Professionals excel at making things more complex than they need to be. That’s how they justify their existence. The same applies to accountants, lawyers, doctors.. Yes, some people need more complex assistance but 95% of the population doesn’t.

As for “running home to momma”, everyone does it: we focus on problems closer to our knowledge domain since we can apply our experience to fixing them. Problems that may still matter greatly, but are outside our knowledge domain, will often get treated as a by-the-way thing: at best, the financial planner would say “pay down your credit cards”. He would be unlikely to say “use the snowball method and here’s some cash management and budgeting strategies that help you pay down debt”. After all, a credit counselor would know this but it isn’t likely that a financial planner made deep study of these sorts of things.

As long as you know that people have different specialties, and are inclined to analyze your situation through their specialties, you’ll be fine.

I think Sam has a good point above. It would be very difficult for anybody to claim a strategy which returs a higher percentage than credit card APRs. However, the mortgage argumet goes both ways. I did a post on “Missed Fortune” finacial planning recently with the same suspicion–that many planners will ask you to create debt simply to free up more money for them to invest. However, I got a LOT of responses from both planners and individuals who had success using insurance products with guarantees.

I’m still skeptical about it–but I’ve leared to at least listen to every strategy out there.

Adjust your asset allocation according to your risk accordingly.

In this case, paying down the second mortgage aggressively makes a lot of sense. If the first mortgage is a 30 year fixed with an interest rate under 6%, it probably isn’t worth paying down aggressively.