Paying off mortgage early may be wise move — or not

By Claudia Buck McClatchy Newspapers

Should you pay off your mortgage early? That’s one of the major personal finance questions the experts are asked. Walt Romatowski, a certified financial planner in Roseville, Calif., weighs in:

Question: I bought a house in 2006 for $1.1 million. I put down $850,000 and now have a mortgage of $230,000. My house is worth about $750,000.

Should I work on paying it off, or just make the payments on this 30-year loan? I am retired and plan to be here about 10 to 15 years.

Answer: The decision to pay off your mortgage early should be based on a number of factors, including:

•Your ability to sustain your desired lifestyle during retirement. If using your savings to pay off the mortgage, don’t forget to give yourself a financial cushion for life’s inevitable surprises.

The interest rate you are paying on your mortgage. If your current interest rate is high (i.e., greater than 5 percent or variable) and you are unable to refinance, it might make sense to pay off the mortgage earlier.

Your tax bracket (i.e., how beneficial the mortgage interest deduction is to you).

Psychologically, the importance of not having a mortgage. Some folks derive significant satisfaction in having no debt; for others, it’s not a big concern.

Since you plan to live in your home for the next 10 to 15 years, the current market value is not that important in this decision. By the time you are ready to sell, your home value should have recovered.