...Unless the entire mortgage is paid off, paying down principal does not reduce the monthly payment on the loan, so as a matter of cash flow you are no more free than you were prior to the pay-down - the mortgage will simply be paid off sooner....It is likely that if you wanted to pay down of 50% of your mortgage that your lender would agree to "recast your mortgage" (Google this) which would reduce your mortgage payment by 50%. This should only cost a couple of hundred dollars in processing fees. If for some reason, like bad credit, you cannot refinance then I would look at what percent of your net worth would be in the home if you paid it off. Putting 80% of your net worth into the home would make me feel uneasy unless the rest of your situation is special. If less that 30% of your net worth would be in the home then I would likely pay it off.If you can refinance to a reasonable interest rate then paying it off or not really depnds on the rest of your situation.
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