We have $300,000 on our mortgage. Should we use the money in our CDs to pay it off?

It makes sense to have all this access to cash, but we owe that much on our mortgage?

The interest on the CD and cash each month doesn’t make as much as mortgage insurance. We are in the 22% income tax bracket.

Can you tell me what makes financial sense: paying off the mortgage or continuing with CDs?

Evaluate my options

‘The big moveis a MarketWatch column that examines the ins and outs of the real estate industry, from finding a new home to applying for a mortgage.

Have a question about buying or selling a home? Want to know where your next move should be? Email Aarthi Swaminathan at TheBigMove@marketwatch.com.

Dear Pesata,

If by “mortgage insurance” you are referring to private mortgage insurance (PMI), then it may make sense to pay just enough of your mortgage to eliminate that fee.

You can request removal of PMI if you have paid down your principal balance at 80% of your home’s original value. Hypothetically speaking, if you put 10% down on your $500,000 home, you’d have to pay another $50,000 to cover mortgage insurance, even though you only have $306,000 left on your balance.

This still leaves you with a $50,000 cash buffer and your CDs intact, which you can draw on for emergencies. You’ll also save hundreds of dollars on interest payments by paying off your balance. You also increase the equity you have in your home.

Writing off your money to pay off your mortgage is another route, but it requires more thought.

Even though you’re building more equity in your home and becoming less in debt, you also need to budget for any emergencies that may arise in the next 5 to 10 years.

Do you have enough money to fund any unexpected expenses? Would either of you see a drop in income that could impact your budget, given that you are both at or near retirement age? Do you anticipate any large increases in home insurance costs or property taxes that could put a strain on your finances? And would you have enough retirement savings?

Think about the past and plan for the future.

“What I find catches retirees off guard is that life goes on even when you retire. You may need to install new windows, a new heating and air conditioning system – and these can cost tens and thousands of dollars,” Tania Brown, certified financial planner and director of financial coaching at OfColor, told MarketWatch.

Your monthly mortgage payments remain, even if you pay off part of your loan

And even if you use all your money to pay off part of your mortgage, you’ll still have a balance, Brown added. “So if you pay it off, your balance may go down, but your mortgage payment won’t change,” he said, even if you pay it off sooner.

Also check to see if your lender charges you a fee for paying off your mortgage early. There are sometimes prepayment penalties for doing so.

You have a mortgage rate of 4.99%, which is lower than the current 30-year rate. If your monthly costs are manageable, why rock the boat?

And if you pay off enough of your mortgage to remove the fee, you’d see you earn some interest through your savings, which could compound over the next few years. You could also invest some of that $100,000 in cash for a higher return.

Instead, if there is no early repayment fee, you may want to make an extra payment here and there to pay off your mortgage faster. Brown also suggested shopping around for CD rates that may be higher than what you get.

It’s a deeply personal decision, but if you have such a large balance and are at or near retirement age, it may make sense to keep your money invested in CDs and pay enough to remove the insurance fee.

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