Living Stingy has written a lot about the pros of paying off your mortgage (sample post link below, but you can search to see all the posts he's written on the subject). He even advocates paying off the mortgage at the expense of 401k contributions in some situations, although I have elected not to go that far:
http://livingstingy.blogspot.com/2010/04/pssst-want-to-get-in-on-risk-free.htmlWe are also in a position where we could potentially pay off out mortgage in about 13 more months. How are we planning to do this?
1. We are still maxing out both of our 401k contributions. We are in 28% tax bracket and the tax man around here (me) has stipulated that any extra mortgage payments only happen after this is achieved.
2. We are pausing investments into our taxable accounts until the mortgage is paid off and redirecting that money toward the mortgage.
3. I sold some municipal bonds and applied that money to principal - my "safe" investment is now the house instead of a bond fund (which has had some minor hits to principal and is thus not totally risk-free anyway).
4. We are putting both of our bonuses next month on the mortgage (you can still do this, too).
5. We are not liquidating our taxable accounts to pay off the mortgage except where it makes sense to do so (for example, ditching the muni bond fund). But we will probably sell some company stock when it vests this spring and apply that to the mortgage in order to diversify our risk. It is not usually recommended to hold too much company stock with a current employer.
So, what I would do if I were you is probably to go with a slight modification of option 3: keep contributing to the 401k (maybe consider contributing enough only to get the employer match), BUT also dump the bonuses on the mortgage. How long would that take from now to payoff date? I am a fan of the increased cash flow that having a paid off mortgage provides, especially having made it through yet another round of layoffs at work recently.