It's an age-old question that many homeowners struggle with: To pay off the mortgage or not?

Well, there is no tall-tell answer to this question, but most of the time you can bet that it is not the smartest thing to put all of your efforts towards paying off the mortgage.

There are many other things you can do with your money than paying off your mortgage in full, and there are actually tax benefits to just having a mortgage in place.

A January 12, 2007 article by Jennie Phipps, "Keep the mortgage or pay of the house?" from Bankrate.com and reposted on Yahoo! Finance, discusses both sides of the story for this very important question.
"Mortgage burnings used to be a ritual that families hoped to be lucky enough to perform. But times have changed. Now growing older and retiring doesn't necessarily mean you don't continue to pay the mortgage every month. As they head down the road toward retirement, many people are asking themselves: Should I use part of my nest egg to pay off the mortgage and gain a sense of security? Or should I leave my nest egg intact where it's earning interest and let my mortgage continue to provide me with a tax deduction?"
"If you decide to keep your mortgage in retirement, you won't be alone. In 2004, 32 percent of households headed by someone age 65 to 74 were carrying home mortgage debt, and nearly 20 percent of households headed by those 75 and older had a mortgage, according to the triennial Federal Reserve Survey of Consumer Finances conducted in 2004."

Most people that say it is better to hold on to their mortgage say so because of some sound reasoning. It makes even more sense when rates are low and you can use money saved to invest in other things.

Obviously, the tax advantages play a big role. Basically, the more expensive your house, the better the tax advantage will be.
"The picture changes dramatically for a single homeowner with a house in San Francisco, where the median price is $749,400. In the first year of a home purchase, for which he puts down 3 percent, the tax benefit would be worth $16,222. If that homeowner in the 33 percent tax bracket were to hold on to his home for 30 years, the cumulative deduction would be worth $368,728. A pretty good deal."

When it comes to saving for retirement or paying off the mortgage, the answers becoming startlingly clear.

A recent report by some noted economists stresses the importance of not paying off the mortgage.
"About 38 percent of U.S. households that are accelerating their mortgage payments instead of saving in tax-deferred accounts are making the wrong choice."
"One of three authors of the report, Clemens Sialm, an assistant professor of finance at the University of Michigan, says his conclusions are actually more dramatic than they appear. He says the number of people who should be saving instead of paying off the mortgage is closer to 60 percent because the economists relied on very conservative investment returns to calculate their findings and didn't take into account employer matches."

All in all, homeowners should shift their focus to more lucrative investments instead of just rushing to pay off the mortgage.

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