What to weigh when deciding to pay off the mortgage early

Q: My friend's accountant recommended that she pay off her house in Orange County, Calif. I think this is a bad idea. My friend is tired of paying a monthly mortgage of $782. What do you think?
N.S., via e-mail

A: It might make sense to pay off the loan, but consider figures provided by Richard Fingerman, a certified financial planner in Boston. Let's say your friend has a $100,000 loan at 6 percent for 30 years. Over that period, payments total more than $215,000, including $115,000 in interest. Paying off the loan early avoids those charges. But doing so might end her ability to itemize interest deductions on her income-tax return. Payments in the early stages of a mortgage are largely interest.

Another possibility, Mr. Fingerman says, is to add extra money to a monthly payment to reduce the length of a loan. That 30-year loan will cost about $600 monthly in principal and interest. Kick in an extra $100 every month, and the payback period drops to 21 years.

Fingerman, however, doesn't recommend paying off the loan if that means dipping into her emergency fund (three to six months of spending money). Nor does he think it's a good idea to tap accounts that trigger taxes or early-withdrawal penalties.

Q: I'm 26 with some investments in mutual funds, and an IRA. At a previous job, I enrolled in a plan with Smith Barney. Although I no longer work there, a Smith Barney representative still calls to offer investments. I'm not sure if I can trust the opinion of one firm (especially considering its recent scandal), but am not sure what to do now. I don't have the time or knowledge to do the research myself, but I'm worried about picking a financial adviser. I don't have much disposable income for this type of luxury.
H.H., via e-mail

A: You're not alone in being unwilling to try to do your own investing. Because of your discomfort, Wendy Spencer, a certified financial planner in Arvada, Colo., thinks you should get a second opinion before parting company with your current adviser. She offers these guidelines:

• Quiz friends and family members about their advisers. It may be that a stockbroker suits your needs. After all, they've gone through training and licensing and many are pretty well versed in financial guidance. There also are certified financial planners (go to www.fpanet.org and use its "planner search" tool), as well as fee-only financial advisers (www.napfa.org).

• Interview advisers to see if they handle the types of investments you have, or may own in the future. Many advisers offer a free consultation to see if the two of you are a good match.

• Look for someone who has sufficient experience to offer advice as your financial circumstances change. This may help you determine if you want to stay with your current adviser or switch.

• Some planners will work on an hourly fee basis. You may need only a few hours of consultation in a particular area. This can help people with limited amounts to spend on financial planning.

Having a basic understanding of investing is critical to assess what your adviser recommends, Ms. Spencer adds. Community colleges and some recreation centers offer investing classes that involve only a few hours of your time. Who knows? Fellow students may give you ideas on how they picked an adviser.

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