A financial planner explains whether you should pay off your mortgage early

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Certified financial planner Sophia Bera answers: "Should I pay off my mortgage early?"

YES. Done! Just kidding.

Well, the answer is that it actually depends. When it comes to debt, mortgage debt is probably the best kind of debt that you could have, but it's still debt.

People like to say that you get a nice tax deduction, but it's usually overrated for the amount of money that they debt is actually costing you over your 30-year mortgage.

If you have any other debt, I would pay that off first. If your mortgage is the only debt you have left, I would want to know more about your mortgage: Is it a 15-year or a 30-year mortgage? What is the interest rate? When do you want to retire?

I would also want to find out how you're doing on reaching your other financial priorities? Do you have adequate emergency savings (three-six months)? Are there any big upcoming expenses on the horizon (i.e. car purchase, paying for college, trip around the world, starting a new business)? Are you saving enough for retirement?

Currently, the rates on 15-year mortgages are about .75% cheaper than 30-year mortgages and they tend to be under 4%. So if you really want to pay off your mortgage faster and you have a 30-year mortgage, I would probably suggest that you consider refinancing to a 15-year mortgage and cut your interest rate at the same time. That's the first step.

The next step is something that's going to cause a lot of controversy, but I'm going to say it anyway: If the only debt is a mortgage, you have enough emergency savings, you're on track for retirement and there's no big expenses on the horizon then I say GO FOR IT! Pay down your mortgage with gusto!

This is contrary to what most traditional financial planners will tell you. They will say that if your mortgage is only at 4% then you should invest in hopes that you get an 8%-plus rate of return on the stock market over the long term. (But also remember that this is how most financial planners get paid, on how much of your money you invest with them. So if you take out $200,000 from your portfolio to pay off your mortgage, their income goes down).

I didn't always see the logic in paying down your mortgage instead of investing, until one of the smartest and most well-respected financial planners I know wrote this article: Why Keeping A Mortgage and a Portfolio Might Not Be Worth the Risk.

He also argues that most financial planners wouldn't tell clients to take out loans to make a 401(k) contribution so, "we probably shouldn’t be telling them to keep their mortgage and direct savings to the investment accounts, either." Because it's the EXACT SAME THING.

Now, go have a mortgage burning party! (Apparently, that used to be a thing).

This post is part of a continuing series that answers all of your questions related to personal finance. Have your own question? Email yourmoney[at]businessinsider[dot]com.

Sophia Bera, CFP® is the Founder of Gen Y Planning and has been quoted in The New York Times, Forbes, Business Insider, AOL, The Wall Street Journal, and Money Magazine. She tweets, travels, and loves helping millennials manage their money more effectively. Curious? Sign up for the free Gen Y Planning Newsletter.

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