[ITEM 4] QUESTION: When does it make sense to pay off a mortgage early?

The question of when exactly it makes sense to direct free money toward early repayment of a mortgage loan requires a balanced mathematical and psychological calculation, as there is no universal answer for all situations. The main guideline here is the level of the interest rate on your mortgage loan compared to the current yield of alternative conservative financial instruments, such as bank deposits or federal loan bonds.

If the mortgage rate is high, and your budget already features a reliable emergency financial cushion without any other more expensive consumer debts or credit cards, then early repayment becomes an unquestionably profitable decision. In this case, every ruble paid in advance guarantees you savings on interest equal to your mortgage agreement rate, which often exceeds the potential net investment return after taxes and risks.

On the other hand, if you have a subsidized mortgage with a very low rate, the situation looks different, since inflation and high yields on safe deposits allow you to earn more income from placing money in a savings account than you spend on servicing a cheap loan. Under such conditions, it is sometimes much wiser to direct free funds not toward closing the mortgage, but toward building an investment portfolio, purchasing reliable assets, or achieving other long-term financial goals.

To make a balanced decision on early repayment, it is recommended to perform the following actions.