When Should You Begin to Aggressively Pay Down Your Mortgage? | Pound Ridge NY Homes

The clear advantages of paying off your mortgage as quickly as possible have changed quite a bit over the past few years. The urgency to pay it off has somewhat diminished, as interest rates have plummeted to historical lows. It’s no longer the black and white decision it was back when interest rates hovered between 6% and 9%, and even the 11% to 13% we saw a couple of decades ago.

I am a big proponent of paying down that ugly mortgage beast as soon as is practical. But, before you go cutting a check to the bank, there is a pecking order of financial priorities you need to address before you consider tackling your mortgage.

In order of importance, here are the places you need to put your financial attention first:

• Take The Cards Off The Table: Pay off all credit cards with high interest rates. Consider the huge discrepancy between credit cards with interest rates of 13% – 23%, and a 4% mortgage interest rate.
• In Case Of Emergency: You need to build an emergency fund, ideally 8-12 months of living expenses. Yes, today’s job market is improving, but if you suddenly find yourself facing a layoff, you need to be prepared to sustain up to one year of living expenses.
• Build Up For Retirement: Are you able to make the maximum yearly contributions to your retirement accounts, 401K, IRA or an equivalent?  Ask your accountant what the maximum allowable is for you and go for it!
• Get The Kids To School: Ah yes, the kids and college funds.  Depending on how many children you have, how old they are, and what type of college enrollment expectation they have, you need to be making adequate contributions to those 529 plans or other college savings accounts.
• You May Live A Long Time: My mom is 97 this year, and my aunt just turned 100.  So I am keenly aware that my money could run out before my health runs down.  Another priority investment you need to be making each year is toward long-term health care insurance. It is not as costly when you start it in your 30’s or 40’s.  But, if you didn’t get around to it till your 50’s, it will take a hit out of your budget each month.

http://www.fool.com/investing/general/2014/03/09/when-should-you-begin-to-aggressively-pay-down-you.aspx