It seems that a common question for homeowners is whether or not it’s a good idea to send extra principal along with (or in addition to) their mortgage payments. The answer to this question varies from case to case, but here’s what I do…

We have a very reasonable mortgage rate (5.75% for a 30 year mortgage — we could have done a bit better, but we pulled the refi trigger just a touch too soon), so it hardly makes sense to aggressively pay it down. In the long run, we’ll most likely come out ahead by doing things like sending extra money to our retirement accounts rather than to our mortgage company. Yet, I still feel some strange compulsion to pay off that darn mortgage as soon as possible. So…

I’ve taken to making additional principal payments with ‘found’ money — things such as credit card rewards, rebates for stuff that I would have bought anyway, etc. The way I look at it is that money like this is just gravy, so I won’t miss it anyway. Yes, I could probably do better in the long run by investing it, but this approach allows me to scratch the prepayment itch without affecting our day-to-day finances.