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[tmd012]

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[rpr]

In the long run, it probably doesn't matter much. Just pick whichever one allows you to sleep better. I have a very similar mortgage amount with the same rate but not as much left over to invest in taxable. Right now, I've been putting some in a Vanguard Taxable account for some liquidity purposes.

[frugaliknowit]

If your goal is to "buy a market dip" of some sort, you should accumulate cash, not prepay mortgage.  When you prepay mortgage you are throwing money "down a hole".  The benefit of prepaying mortgage is reducing future expenses.  It is similar to buying a bond with a maturity date of whenever the mortgage is paid off.

Should you attempt to time the market?  The problem of timing the market is you have to be right twice...

[Joel]

Personally I don't prepay debt below 4% interest rates.

[Cheddar Stacker]

Personally I don't prepay debt below 4% interest rates.

+1. I wouldn't.

You didn't mention what you are investing in. If you're indexing like most people here (nothing wrong with that method, I do with most of my money) maybe you should consider a strategy change for new investments while you think the market is over valued. If you look at buying individual stocks you can find some value. I'm not suggesting day trading or penny stocks, but buying solid companies that might be trading under what their normal value might be and holding them long term. There are plenty of good companies out there with PE ratios well under 16.

If things change in 6 months and you think we've had "the correction" you're looking for, switch all new investments back into indexes and leave the stocks as is.

[thedayisbrave]

I'm with rpr - do whatever helps you sleep better at night.  In the long run it probably won't make much of a difference.  By waiting for a "market dip" you are indeed timing the market.  It could dip tomorrow, it could go up for 5 more years... no one has any way of predicting the future.  What if you split the money ($1K toward principal pay down, $1K toward index funds)?

Personally, I have roommates that pay my mortgage w/ the rent money that comes in so I don't pre-pay my mortgage(s).