Your Questions Answered: Should I Pay Down My Mortgage?

Last month we completed a Second Opinion consultation for Gloria. Gloria had accumulated extra money in her checking account and had extra money available each month to put toward additional savings. She asked if she should pay down her mortgage with those funds or put it toward long-term savings and investment.

I have always maintained that this question is as much a psychology question as it is a math question. What makes the most sense mathematically must be tempered with the SAN, or Sleep at Night, factor.

It turns out Glora didn’t necessarily mind having a mortgage, but her mortgage was new, and the risk-free return of eliminating debt was appealing to her (and me!). At the same time, she liked the idea of liquidity and the potential of earning attractive long-term returns with her investment assets.

What was she to do?

The good news is that we had a way of knowing exactly the right approach for this decision.The bad news is that the best way of knowing was to wait twenty years and then we would absolutely know the best thing to have done.

After some collaboration, Glora decided to split the difference between her two options. Half of her excess savings went to investments and half went to the principal on her mortgage. The same with her excess discretionary funds.

Is this the right approach for you? Well, only you can decide this.

However, the takeaway here is to not let the Perfect become the Enemy of the Good. Sometimes we become so focused on determining the absolute best strategy to move forward that we never actually move forward, all at the expense of reasonable and easily identified solutions.