You might consider spending extra money on your mortgage to eliminate your debt more quickly. However, paying off your mortgage early isn’t always a good idea. Each situation is unique, and no solution is the right choice for everyone. Eliminating debt is a great idea, but it’s not always the best.

Consider these reasons to avoid paying off your mortgage early:

1. Your mortgage has a prepayment penalty. Many mortgages have clauses that penalize the homeowner from paying off the mortgage early. This period is usually only the first five years or so. The bank would prefer you keep the loan for the entire term.

• Examine your mortgage paperwork and see if such a clause is part of your loan contract.

2. You consistently make a better return on your investments. If your mortgage is at 6% and you’re making 10% in the market, you might want to put your extra money towards additional investments. You’re coming out 4% ahead with this strategy. Paying off your mortgage might not be the best investment you can make. Do the math and then decide.
3. Your emergency fund is inadequate. A financial emergency can cost much more than the money you’ll save by paying extra for your mortgage. Everyone hits a rough spot eventually. It’s just a matter of time. Are you able to handle a financial emergency adequately?

• Build a cushion of at least several months’ worth of living expenses before applying extra funds to your mortgage principal.
• Consider how much credit card interest will cost you if you don’t have an emergency fund. In some circumstances, an actual financial challenge could put your home at risk. Build up your reserves before paying extra on your mortgage.

4. You currently have high-interest debt. Does it make more sense to pay down your 17% credit card or your 6% mortgage? The best investment opportunity you’ll ever have is paying down your high-interest debt. Credit card debt is insidious. The minimum payments are very reasonable but very costly over time.

• Paying off a mortgage early provides peace of mind and security, but it’s rarely a good return investment.
• Any debt with a higher interest rate than your mortgage should be addressed first.

5. The tax advantages outweigh the benefits of paying off your mortgage early. Early in the payback process, a most mortgage payment consists of interest. This interest is tax deductible.

• Some homeowners might prefer this tax break instead of paying off the mortgage early.
• Is the tax break worth carrying debt? Also, consider the other ways the money could be put to work.
• Think about your overall tax situation. How much will your tax burden change if you don’t have a mortgage payment? Are you prepared to pay the extra taxes?

6. You’ve failed to save adequately for retirement. Putting your extra cash toward retirement instead of your home might be wiser. Many couples decide to pay off their home and then worry about retirement. But there’s no telling what the future may bring. Long-term unemployment or death may derail a plan like this.

• Be sure you’re regularly contributing to your retirement before throwing extra payments at your house.

Paying off your mortgage and knowing that your house belongs to you instead of the bank can provide security and comfort. However, paying off your mortgage early isn’t always your best option. Examine your situation and make a decision that best addresses your needs.

If you are trying to get a handle on your finances and need an excellent place to start, I recommend Dave Ramsey’s The Total Money Makeover. I can pick at elements of his approach – but it is both psychologically and financially sound and straightforward to follow. Plus, his budgeting software, podcasts, and lessons/local groups provide 360-degree support. Set your politics and religious concerns about Ramsey to the side – if you have them – his financial approach is the real deal.