According to the latest data released by the Federal Reserve Bank of New York, Americans owe a total of $8.88 trillion in mortgage loans. With the 30-year fixed rate at a little over 5 percent, the question is often asked, especially for those who are retired, or those about to retire: "Should I pay off my mortgage?"

Of course, I am a big proponent of being as debt-free as possible, in order to avoid interest costs, but I also understand the concepts of lost opportunity costs and effective interest rates. I find it very interesting when I talk to young adults, how keyed into those concepts they are when it comes to mortgages. So, they immediately say, if you can achieve a better after-tax rate of return by investing the same money over the remaining term of the mortgage, that strategy makes sense, especially if it is in a tax deferred retirement account. Of course that can be easier said than done, but they also realize that. Then, they are also very aware that, if they are going to itemize deductions on their taxes, the key is what is the after-tax effective interest rate of the mortgage loan.

With that said, and realizing that it always depends upon a great number of relevant facts and circumstances presented by the inquirer, here is some important advice that I have read about paying off a mortgage early.

Bob Berger of advises that you should never pay off a mortgage early if there are four things that you haven’t done yet.

First, you haven’t paid off loans with higher interest rates than your hopefully lower fixed rate mortgage. Credit card debt, car loans, student loans and home equity lines of credit come to mind immediately.

Second, you don’t have an appropriate emergency fund for where you are in life. Whether that appropriate account is six, eight or 12 months of expenses, as we have said in the past, may depend on whether you are also paying down high interest rate debt and adequately funding you retirement with dignity, but you need that funded and liquid emergency account.

Third, you are not living below your means by regularly saving a certain percentage of all of your income, whether it be10 percent or more.

Fourth, you have not saved enough for what we always refer to as significant anticipated expenses. These could include children’s educations, necessary home improvements, a new furnace or automobile, a wedding, or a once in a lifetime special occasion vacation. You don’t want to pay off a mortgage and then have to borrow at a higher rate.

One additional factor that we have previously discussed, is that for some taxpayers, given the new $10,000 cap on state and local taxes, it may make sense to elect the new standard deduction ($24,000 for joint filers), which eliminates the after tax effective mortgage interest rate consideration.

The next question is that if you have taken care of those four things, and you have some extra cash, and, as part of your financial planning, you are committed to paying off your mortgage early, here are some tips from

1. Refinance your mortgage loan to one of a shorter term with a lower interest rate, especially if it can be done with no or little in fees. The payments will be higher, because of the shorter term, but that interest rate could save you significant interest costs.

2. Pay an extra one-twelfth of the mortgage payment, or more, each month, or one extra mortgage payment a year. My wife and I paid extra payments on our 15-year mortgage as often as we could, and paid it off in less than 14 years. Make sure that you confirm with your lender that yoru extra payments will in fact be applied directly to principal upon receipt.

3. Consider applying some or all of any windfall you may receive to paying down your mortgage. Examples could include a bonus or a raise at work, or an inheritance. When you do the math on early payoffs, you may be surprised. For example with respect to the last tip, if you have a 30-year fixed rate mortgage of $200,000, at a 4.5 percent interest rate, and five years into the mortgage you make a lump sum payment of $10,000, here is what happens. It pays the mortgage off two years and four months early, and it saves more than $19,000 in interest.

I am also a proponent of, if nothing else, having your mortgage paid off by retirement. I remember that in my parents' and grandparents' generations they had “mortgage burning parties,” and they were a big deal.

Here is a great, straightforward, personal analysis by the financial columnist Michelle Singletary on

1. We hate debt. Psychologically we loathe the feeling of owing anyone money. We want to move into retirement without the burden of being borrowers.

2. If we get rid of our mortgage, we are eliminating the biggest expense in our retirement budget. This leaves room to manage other costs that may increase such as health care.

3. Paying off our mortgage early is a guaranteed return. We will save thousands of dollars in interest with our early payoff plan. We could invest the extra principal payments, but we aren’t guaranteed a return. It’s probable, but not a sure thing.

Consider this discussion and determine if it makes sense for you, at some point, to eliminate some of those mortgage interest costs.

John Ninfo is a retired bankruptcy judge and the founder of the National CARE Financial Literacy Program. Find his previous weekly columns at or at