I had an email from an old client who was leery of the stock market and wondered if it was a good idea to put some "found money" into paying off his mortgage.
According to a recent Kiplinger article, there's a big downside to tying up too much money in your house: It can be very difficult to access that cash, especially now that lenders are less generous about setting up home-equity lines of credit.
Before paying down or paying off his mortgage, he should pay down high-interest debt and build an emergency fund. And keep some of the longer-term money in stocks or stock funds.
That said, there are a couple of cases in which paying down a loan might make sense. With an adjustable-rate mortgage that continues to move up, putting extra cash into his mortgage could give him enough equity to refinance.
And for someone close to retirement who already has a diversified portfolio or long-term investments, paying off a mortgage can make a big difference in his finances. With no monthly housing payment, he needn't withdraw as much from his retirement funds in a down market.