Here is a link to a white paper with a very technical analysis of the issue: http://www.chicagofed.org/publications/workingpapers/wp2006_05.pdf

As a mortgage broker and financial planner, I believe that most people would be better off investing than paying down the mortgage. Why? Even if you are a conservative investor (say you are earning 6% in a mix of cash and bonds) with a fixed mortgage at 6%, investment is preferable because of the tax advantage of the mortgage….even if you are in the 10% tax bracket.

Furthermore, what good does equity in your home do? Once you have a 20% equity position, you are eligible for the most attractive financing available. Any equity beyond that is locked into the home, unavailable to you should you have a financial crisis (sudden unemployment, medical issue, etc). If and when that happens, you have to approach a broker and borrow that equity back on their terms, or face selling your home or losing it to foreclosure.

IF and only if you are able to save those funds (not spend them, as do most Americans), then you are almost definitely in a better position by investing (even in a non-tax-advantaged account) than prepaying your mortgage. Here is another document worth reading – a much easier read than the white paper above: http://www.cmpsinstitute.org/images/HowtoSafelyManageHomeEquity.pdf

Best of luck!