Answers to your crisis questions

With the economy and the market floundering, you need Money's help more than ever. Our experts are on the case.

1 of 4
Is this a good time to prepay our mortgage?
Is this a good time to prepay our mortgage?
George Mannes Answer Guy columnist
Question: My wife and I have a $100,000 balance on our fixed-rate 5.5% mortgage. We also have $80,000 in mutual funds in a taxable account that's down 50% this year. Should we sell the funds to pay off the loan? Then we wouldn't have to worry about losing our house if we got laid off. --George P., Hopewell Junction, N.Y.

Answer: I salute you for trying to guard against a financial setback before it occurs. But your proposed solution probably isn't your best choice. First, you'll likely earn a better return in the market, says San Diego financial adviser Jean Sinclair. Assuming you itemize deductions, your 5.5% mortgage costs you less than 4% after tax. Although stocks have been rotten lately, from today's depressed levels you ought to easily beat 4% over the long run.

The second reason not to pay off the mortgage: If indeed you lose your job -- and you run though your cash cushion -- it's easier to sell stocks than to pull the money out of your house.

A better way to address unemployment fears, says Sinclair, is to take a hard look at your spending. If one of you were to be laid off, what could you cut back on? Doing this exercise now, before any emergency pops up, can help keep worries under control.

NEXT: Can I take a tax loss from a 529 plan?
Last updated December 26 2008: 9:20 AM ET
More Galleries
8 great summer vacation deals Want the perfect summer getaway? MONEY searched for destinations with balmy weather, unique attractions, fun stuff to do, and great deals from four different categories: beach, mountain, culture and city. More
Best ways to catch up on your retirement savings Even the most financially responsible people make a few mistakes or run into obstacles along the way. These tips -- from cutting taxes to selling securities -- can preserve a safe retirement. More
Nearing retirement? Fortify your finances Your financial goals are within reach. Here are tips and tools to make sure you achieve them. More

Special Offer

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.