I am in a very similar situation. However, a sound investment will produce 6% -8% in a good index fund. That's higher than the 3.5% your paying on the mortgage leaving you with a great net return. In addition, you get to write off a portion of the mortgage on tax returns lowering your mortgage interest rate even further. Investments are best left in the market making more money, and depending upon where you live, home values are not going up. There's also security in knowing you have the money to pay the house off if an emergency should occur, or even sale the house. That being said, I know there's less stress in being totally out of debt; however, it would take a lot of time to rebuild that kind of investment portfolio. I hope this helps. For me, I plan to pay my house off when the intereest is paid down and monthly payments are predominently principal meaning I have less tax advantage.