No. of Recommendations: 3
Hi RonsGail,

There are certainly advantages, and disadvantages, to paying down your mortgage with extra payments. You will be saving mortgage interest charges, taking away mortgage interest deductions, adding to your home equity, taking away from monthly cash-flow, taking away from your pool of investable capital, taking away from your liquid reserves.

You say your objective is to be mortgage free as soon as possible. I might choose to offer an alternative viewpoint. Perhaps your REAL preference is to become "Mortgage Worry Free" as soon as possible. What I would recommend doing is set up a seperate investment account to deposit into. Take the money you would otherwise pay as extra mortgage payments, and deposit it into this account. You may choose to have this account in quite safe instruments, such as CD's or Money Market Funds. Nonetheless, be just as diligent in depositing your spare cash here as you would if paying extra to the mortgage.

As this account grows, it will compound on itself. It will always be there to use should you need help with the regular mortgage payments. It will always be there and available (which capital tied up in your home equity is not) in case of an emergency.

This is just a simple idea, based on keeping your capital available to you at the lowest costs and best earning capabilities. To be precise and accurate, you would need to sit down with a sharp pencil and do some detailed calculations figuring expected interest on the mortgage, mortgage deductions you would get, other tax considerations, expectable returns wherever you actually park your safety capital, etc.

There are some others on these boards (and the tax boards) that may love diggin into the dirty numbers work with you... let's see if we can scare them up.

All the best,
Dave Donhoff
Home Finance USA
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