It is important to note that liquidity and building your investment asset portfolio is very important for you. Hence, you need to understand how important it is to stay liquid so that you can navigate the financial challenges we all incur from time to time (for example, your car needs a major repair, new roof on your home, major medical bills, etc.). Secondly, we need to build an asset portfolio for our future, whether that be in stocks, real estate, bonds, other alternative investments, etc. Accelerating the payoff of a mortgage costs you out of pocket savings.
Would you rather keep that for liquidity purposes or invest those funds instead, or would you rather accelerate your principal reduction on your home, which effectively transfers liquidity to equity in your home, with those funds? If we had to rate those options in order of financial importance for the consumer, they would rank liquidity first, then asset growth second, then mortgage debt reduction. You need to understand that mortgage financing, especially after tax, is the cheapest financing you will ever have, so it should be the last debt you pay off.
First, pay off any credit card balances you have, then student loans, then car loans and any other unsecured loans you might have. If at that point, you are in a solid liquidity position, are building a nice investment portfolio, and you don’t feel you can invest any excess savings you have (in assets that will produce a return higher than the mortgage rate you pay) then go ahead and start accelerating the payoff of your mortgage. However, if you can invest funds at a higher rate of return than your mortgage is costing you, we suggest you invest the funds instead of paying extra on your mortgage.