With interest rates rising, does it still make sense to try to pay your mortgage off early by paying a little extra every month?

I think so, though bank certificates of deposit aren’t a bad alternative.

Borrow $100,000 with a 6 percent, fixed-rate mortgage and you’ll pay nearly $116,000 in interest over 30 years. Put an extra $100 a month into principal payments and you’d pay just $76,000 – and be done with mortgage payments nine years earlier.

On the other hand, that $100 a month could go into some other investment and perhaps do better. If the return on the alternative is higher than the mortgage rate – 10 percent a year versus 6 percent, say – the alternative will earn more.

Remember, though, that the 6 percent “return” with the mortgage is guaranteed. You might get more in a good stock or mutual fund – but you’d also risk a loss.

That’s why I think it makes sense to compare the extra loan payment with what you can make on a fixed-income investment such as a bond, bond fund or certificate of deposit.

The 10-year U.S. Treasury bond currently pays about 4.5 percent, and you can get about the same on good five-year CDs. Most fixed-rate mortgages charge more than that, so the extra loan payment looks better.

Although yields on Treasuries have risen, investing in this or any other type of standard bond entails “interest-rate risk.” If rates rise, a bond you buy today would fall in value because investors would prefer the newer, more generous ones. A 1-percentage-point rise in rates could cause a 10-year bond to lose 8 percent of its value.

With rates expected to continue rising, this risk is high. You don’t face that risk when you put extra money into your mortgage.

On the other hand, if you invest in the mortgage, the return is fixed at the mortgage rate. So you’d still be earning that 6 percent even if bonds eventually yield 7 or 8 percent.

So I think the best alternative to the extra mortgage payment is the bank CD. Such CDs are government-insured, and they don’t lose value if interest rates rise.

Some top one-year CDs now pay more than 4.5 percent. With these, your money would be more accessible than it would be with the extra mortgage payment. If interest rates continue rising, you can reinvest in a new CD in a year.

Other things to consider:

¢ Extra principal payments can be made in small sums. To get a good bond or CD, you need a lump sum of at least $500 or $1,000.

¢ Before putting extra money into a mortgage, pay off debts with higher interest rates, such as credit-card balances.

¢ If you’ll have the mortgage for only a few years, extra principal payments won’t earn very much, and it might be better to build cash for a down payment on a new home.

¢ If you have a variable-rate mortgage, extra principal payments would be especially valuable if they would help you reduce the amount of debt that could be subject to higher interest rates in the future.

Check CD and mortgage rates at www.bankrate.com and see the effect of extra principal payments at www.hsh.com/calc-amort.html.