The best question to ask before you even consider paying off your mortgage early is, why?  You should know the costs and benefits to paying off your mortgage early before making any decisions about how to proceed.

The first benefit to paying your mortgage early is that is increases your homestead exemption in many states.  What does this mean?  It means that your house cannot be taken from you to meet the demands of creditors. 

Second benefit to consider is the extra cash you will have as a result of paying your mortgage early.  Consider when you will have the cash and how you will use it.  Once you have paid your mortgage your cash flow is freed up for other needs.  What are those other needs?  How will they contribute to your household’s finances?

In addition to benefits there are also costs of paying off your mortgage.  Consider the difference between your interest rate and the average market growth rate.  Right now, the average market growth rate is typically higher than a mortgage interest rate. 

Considering only the numbers and assuming the average market growth rate is guaranteed, it is easy to say that investing is a better value than paying down a mortgage.  However, the amount of money you spend in paying down your mortgage is guaranteed whereas investing is often not.  This should be carefully considered.

Another consideration must be the status of your retirement accounts and your plans to retire.  If you are looking at retiring soon then you should make sure that your 401k is fully funded.  How do you know this?  Consider your current monthly budget and assume the investments in your retirement accounts will grow by 7% a year.  Will you have 25 times your yearly budget saved by the time you want to retire?  This is generally considered enough to prevent running out of money in retirement.

If, after considering the above you continue to be interested in paying down your mortgage early.  Carefully review your budget to determine the maximum amount extra you can pay per month.  Remember that when you use these funds for your mortgage you cannot get them back.  You can be flexible each month with the additional amount that you pay to your bank depending on your budget needs for the month.

Finally, make sure that you keep track of when you expect to pay off your mortgage.  Plan a use for the extra cash flow you anticipate to make sure you are maximizing the value of the money for your household.  There are lots of potential uses including using it to pay down others debts or to take advantage of other investment opportunities.  Maybe you want to get a second property – perhaps to use as rental income.  There are lots of options and you should be prepared use your funds to your maximum benefit.