by Elizabeth Curtis

Created on: July 26, 2008   Last Updated: August 01, 2008

Should you pay off your home mortgage? The answer depends on your stage in life and what your overall financial situation looks like. There are many advantages to paying off your home mortgage, but paying off your house should only be done at the right time in your financial plan.

Before you pay off the mortgage on your physical house, you should first consider the condition of your financial house. Paying off your mortgage is not always a smart move. If you have credit card debt or car loans you should address these first. Home loans are still considered "good debt" or debt used to purchase something that increases in value. These types of debts give you no tax benefit whatsoever and charge higher interest rates than most home loans. Pay off these kinds of debt first in order to get the most benefit.

In order to reap the advantages of paying off your house, you should also make sure that you have an emergency fund set up before you pay off your mortgage. Look at all your expenses and set aside 3 - 6 months of expenses in an account that you can access if you need cash. An emergency fund can help you get through a job loss or medical emergency without requiring you to access the equity in your home. With a home equity loan, you are essentially asking the bank to allow you to borrow your own money from them. Wouldn't it be smarter to build up an account where you could "borrow" this money from yourself?

Similarly, make planning for your retirement and for your children's educations part of your financial scheme before you pay off your mortgage. You do not need to fully fund these before working to pay off your home mortgage. Just make sure these future considerations are included in your financial plan. Like an emergency fund, this planning decreases the chance that you will need to access your home's equity for an expense that could have easily been anticipated.

Once your financial house is in order, paying off the house you live in can have several advantages, especially for those nearing retirement:

1. Having a paid off mortgage gives you peace of mind. Knowing that whatever happens in your life, you own the roof over your head is priceless. There are many who say that the smarter thing to do is use leverage or other people's money to own your home. You can have more with less of your own money that way, according to them. They wonder, "Who would want to tie up all their money in their home with the shape of the housing market today? Home prices are falling. If

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