Reducing high-interest-rate debt—like a tax-deductible mortgage, home equity line of credit or student loan—can enhance your ability to save. And for long-term financial stability, we recommend that you start paying down your overall debt to a manageable level once you've taken care of your other savings priorities.
Refinancing considerations

  • You’re being paid to save. If you’re not contributing up to your company’s maximum match, you’re leaving money on the table.
  • Most 401(k) contributions are deducted before taxes—less of your income is taxed and your savings grow tax-free until withdrawn.

Footnote
*Source: Schwab Center for Financial Research. Assumes a new 6% APR 30-year fixed-rate mortgage, and refinancing costs of $2,000. Home value is assumed to be $250,000 and homeowner equity at 20%. Old loan rate was 7% APR with 30 years remaining and the same loan size. The refinancing cost is added to the new loan amount. The income tax rate is assumed to be 25%, and the monthly mortgage savings and tax savings differential earn an annual rate of 4% before tax. The accumulated cash flow savings reflects the monthly mortgage differential offset by the difference in tax deductibility of the mortgage interest. This chart represents a hypothetical situation and is for illustrative purposes only.
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