How do you make this decision, whether to pay off all or part of money by using it for the mortgage?

The only way to make this decision is to sit down with a calculator and work out the numbers. If you received, for example, a lump/total sum of $5,000 upon retirement for your accrued vacation and sick days, you may be faced with/looking at the choice of putting it into a CD or using it to pay some of your mortgage.

If you use a mortgage calculator that is available on many sites on the net, you will find out how much you will save if you pay off your mortgage/home loan. If you had, for example, a $25,000 balance on your 6.25% mortgage and you had five years left on it/to pay, if you used the $5,000 against it, you would save $100 per month in mortgage payments, with a total savings of $835.

In this same example/scenario, you can earn 2.5% on a CD, which would yield $657 over five years. In this example, the decision is easy: pay off the mortgage and pocket the $178. But what about the tax benefit you will lose/give up from paying down part of your mortgage?

In addition, you pay income taxes on the $657 earnings that you made/earned from the CD interest.

Now we believe that/have changed our mind and it is not a good idea to pay off a mortgage and invest instead. This is not necessarily the case. What is important to realize/see is that you have to examine the benefits of each situation.

You have to take a lot of other things into consideration, taxes being one of the most important/significant of them. If you are now in such a low income bracket, because of retirement, that tax implications are very small/negligible, you may consider paying the mortgage off.

Another consideration is that CDs may not pay 2.5%, but rather only 1% or 1 ?%. This may/will change your calculation considerably. What should you do/decide? This analysis clearly teaches/informs us that each situation is different and you have to do all of the calculations for your own situation.