Paying a 7% mortgage off early in effect "earns" 7% interest, which is totally absolutely guaranteed . . . or does it really earn that much? Because mortgage interest is deductible, you may in fact only be paying out about 5% to 5.5% net, depending on how old the mortgage is and therefore how much interest you are paying with each payment. Therefore, what you "earn" by paying it off early may be much lower than the nominal rate on the mortgage.

The second consideration is expected return from any investments you make such as an index fund. If you plan on investing after-tax dollars (i.e. NOT an IRA or 401(k)) and you obviously don't seem to need the money and therefore have a long time frame, your gross return ought to be 12%, your after-tax net ought to be perhaps 8%. This is the best guess based on historic returns. the aggressive argument basically claims that your investments in the stock market will pay off more than the return on paying down the mortgage. The problem is that you could be risking your home trying to arbitrage a 3 or 4 percent difference in returns. So should you pay off early? It may or may not, depending on a variety of factors:

1. How cheap is the loan? If you borrowed in the early 1990's and have never refinanced, your mortgage may be in the 9% range. In that case, you would almost certainly be saving a bunch of money by retiring your loan. By current standards, that's quite high and you could find a number of better ways to spend your money besides paying off a high interest house note. On the other hand, if you refinanced your home two or three years ago, you may find your interest rate down near 5%. That rate is near historic lows; you'd likely be better off investing your extra money somewhere than paying off your house. The stock market has been doing pretty well as of late; many investments today can return more than 5%. Of course, they aren't guaranteed and your mortgage rate is, so you have to do what works best with your own personal comfort zone.

2. Tax benefits. The benefit of the mortgage interest deduction from your Federal income taxes has largely been overstated. It's nice for some people, but it's not a reason to keep the payment if you don't have to. Most people derive no benefit at all from the tax break. But if you live in California and have a half million dollar house, the benefits may be substantial. On the whole, paying no interest by retiring your mortgage is always better than taking the tax break.

3. Do you have other debt? Paying off a five or six percent house note doesn't make any sense if you owe $10,000 in credit card debt at 17%. Pay that debt off before you pay off your mortgage. As a rule, you should probably pay off just about any other debt before paying off your home loan.