How Do I Consider Paying Off My Mortgage?

This is simple.

If you have regular assets that you can use to pay off your mortgage, just set up a profile, call it A, with your current mortgage entered under Housing and all your regular assets entered under Regular Assets. Then run the profile and record your living standard.

Next, copy this profile using the Save As button. Let's call the new profile B. In profile B, lower the amount of the regular assets by the amount that you'll potentially be paying down your mortgage. Next delete your current mortgage and enter the new lower mortgage amount and the new monthly payment. Then run profile B and compare its living standard with that of profile A.

If you don't have regular assets to use to pay off your mortgage immediately, but want to consider paying off your mortgage more rapidly, simply delete your current mortgage and enter a new mortgage of the same amount, but with a higher monthly payment and fewer years over which you have to make payments.

You can use Excel to figure out how many payments you'll need to make if you make a larger payment each month. Just click on Insert, click on Functions, select Financial, and then chose NPER. Enter the interest rate you are paying on your mortgage in this format 7%/12 if it's a 7% annual mortgage rate. Dividing by 12 tells Excel that you make monthly payments. Next enter under PMT the new higher monthly payment you intend to make. Finally, enter under PV the current outstanding balance of your mortgage. Then look for the result shown under these fields, which will be the number of months over which you need to make mortgage payments.

As discussed in the case study, "Pay Off Your Mortgage," posted on the Uses page of our website, whether or not paying off your mortgage will raise your living standard depends on your income and other factors. For most households, paying off the mortgage will likely raise their living standards.