Looking for reasons to pay off your mortgage early? But…are there people in your life telling you that it’s a dumb idea? …That you should just keep the mortgage because you could make more money with your investments? I’ve had those people in my life, and let me tell you…I wholeheartedly disagree with them.
Your gut is telling you that you should pay off your house, and I think you’re right – for 25 reasons in fact! 🙂
You want to pay off your mortgage and I think you should. This post is all about why it’s a good idea to pay off your house. Use all these reasons as fuel against your “wise” (note the sarcasm!) friends that think you shouldn’t.
Reasons NOT to pay off your mortgage early
Before we dive into all the reasons why you should pay off your mortgage early, I thought it might help to understand the reasons not to pay off your mortgage early. In other words, all the reasons you’ll likely hear…but aren’t necessarily correct.
- Your investment yield is likely a higher percent than the interest you’re paying on your house. Therefore you shouldn’t pay off your mortgage early. Instead, invest with your extra dollars.
- Don’t waste your younger years slaving away, trying to pay off your mortgage. Enjoy life! YOLO!
- Keep your mortgage so that you can refinance and pull out equity for future home improvements!
- Use the mortgage as leverage for future real estate investing. In other words, instead owning 100% of one house, you may want to own 10% of 10 houses! Nine of which will earn you money as rental properties.
- You get a tax break on the mortgage interest!
These all sound like valid reasons for not paying off your mortgage early, so what’s wrong with them? Why should you pay off your mortgage early?
Let’s break down each one of these points to understand why they might be bad reasons for delaying your mortgage payoff.
Myth #1: You Can Make More By Investing
Here’s the simple concept.
Historically, the general stock market has earned 10% a year for the last 100 years. The 30-year mortgage interest right now is between 5-6%. Therefore, the simple math tells you that you’d earn more than you’d lose by investing vs. paying extra on the mortgage.
Therefore, you should invest as much as you can and pay the minimum on your house payment.
But is that really true? Is this really a smart option for most people?
I write about this extensively in my recently article, “Should I Pay Off My Mortgage? Depends on the ‘X’ Factor”.
The cliff notes of this article are basically this:
- If you really want to pay off your house…
- You’ll likely work extra jobs, side hustles, and you’ll live on less while you pay down your mortgage. You’ll therefore pay it off much faster than the average individual.
- By paying it off extremely fast, it starts to make a ton of sense to pay it off vs. investing at a mediocre pace (because nobody takes on extra jobs and cuts way back on spending in order to invest extra into their retirement).
So can you make more by investing?
If you don’t work any harder on paying off your mortgage when that’s the intent, then it’s probably best to just invest your money instead. You’ll almost certainly make more by investing than paying off the mortgage.
If, however, you tackle your mortgage head-on and pay it off in 5 years or less (which IS possible by the way!), then it’s better for you financially AND emotionally to pay off your mortgage early.
Ever hear of YOLO? This is an acronym for “You Only Live Once”…Meaning, live for today, not tomorrow. After all, you may not be alive tomorrow!
Some people would say, “Why work so hard to pay off a mortgage? It might take you 5 years to pay it all off, and then you might be dead soon after! Would all that work really be worth it?”
Instead of working your butt off, you could have been…
- Going to concerts every weekend
- Driving around in a fancy new car
- Or skiing the slopes of Aspen!
This is great advice if you absolutely knew you were going to die in a year. Then yeah, you probably should live in the moment, enjoy life, and do what’s truly important to you.
The Problem With “YOLO”
But…most of us won’t die in a year. Most of us will live till we’re 80 or older. If we continue to live in the moment each and every day, the last 30 years of our life are really going to suck!
- We’ll be stuck in a job we hate,
- we’ll have no retirement savings,
- …and we may not even have a family to take care of us because we’ve been too busy “living in the moment” instead of building real relationships with people.
Do I practice YOLO?
Life isn’t all about trips and stuff. It’s about people and relationships. If you’re in control of your finances, it’s a lot easier to think about others vs. yourself all the time. And this of course leads to a richer life.
Myth #3: Keep Mortgage For Future Home Improvements
Here’s what most people do…
- They buy a house on a 30-year note,
- make consistent payments for 5 years,
- then they realize that they have equity in the house…
- …sooo they naturally start to think about renovating the bathrooms and kitchen with their equity…
They end up refinancing the house for another 30 years to pull out the equity, and use $40,000 on a new kitchen, $25,000 on new bathrooms, and maybe another $50,000 on a finished basement.
Sure, they get to fix up their house, but now they likely have a bigger mortgage than they had before, and they’re chained to debt for another 30 years.
Having a mortgage might seem great when you pull out the equity and shine it up all pretty… BUT, what if you just paid the house off instead? Think of what you could do with that house payment every month! What would you do with an extra $2,000 a month?!
Instead of paying off the mortgage early, some people decide to pay as little on their house as possible, and then use their discretionary income as a down-payment on a rental property. And then they buy another rental, and another…Until they have 10 rental houses (all with debt) that earns them a passive income and future equity.
The idea isn’t a terrible one…but it does mean massive debt, which means massive risk.
Let’s play this out – Investing in rental houses instead of paying off your mortgage early…
- You buy your primary house for $300,000 with 10% down. You make the minimum payments for life.
- Then, you buy a rental property for $300,000 with 10% down. You of course make the minimum payments.
- Over time, you buy nine more rental properties, each for $300,000 at 10% down.
In total, you invest $330,000 of your own money into your primary house and your 10 rentals. You likely net $25,000 of income on your properties each year, but you went nearly $3,000,000 (that’s $3 million!) in debt to do it. Is that really worth it? Doesn’t that debt amount make you a little nervous?
What if one of the houses gets trashed?
What if the economy tanks?
What if you lose your job and you can’t pay for some needed repairs on the properties? (Then you can’t rent them out, which means you’re likely losing money overall.)
Borrowing money to invest looks great on paper, but it’s often a disaster in real life. For a large portion of the population, paying off your mortgage and “earning” the 6% interest by not owing that interest payment each month is a pretty good deal. And a no-risk deal at that.
Myth #5: Keep the Mortgage for the Tax Break
I’ve been hearing this one for ages now. People state that “it’s smart to keep your mortgage because you get a tax deduction.”
Tax Implications of Paying Off Mortgage Early
Let’s pretend that the tax break is actually true for a moment. Here’s how the tax deduction would work:
- You pay $15,000 a year on your mortgage. $12,000 of that is interest.
- You make an income of $200,000 a year, which puts you in the 24% tax bracket (assuming married, filing jointly).
- Because you paid the bank $12,000 in interest, you’re able to deduct that amount off from your earnings for the year.
- So, instead of getting taxed 24% on $200,000, you get taxed on just $188,000.
- This saves you $2,880 on your taxes.
The tax savings sounds great…until you realize that you need to pay the bank $12,000 to “earn” $2,880 from the government.
In reality, you’re still out of pocket (ie. losing) $9,120.
If you didn’t have a mortgage, you’d be able to keep that $9k for yourself.
So, even in this example, the tax deduction isn’t at all impressive.
For the people that are Googling, “is it better to pay off a mortgage or keep tax deduction?”… I suggest you read on.
What happens with taxes when you pay off your house?
The above points make the tax deduction argument seem pretty stupid already. After all, by keeping the mortgage, you’re costing yourself $9,120 a year!
Now the tax deduction debate is about to sound really stupid…
The only way you can take the mortgage interest deduction is if your itemized payments throughout the year (interest, property tax, donations, medical bills, etc.) add up to more than the standard deduction. And, with the standard deduction at over $25,000 for a married couple, it rarely makes sense for people to itemize their taxes (only 10% of the population actually itemizes their deductions).
So, not only does the tax break not make a ton of sense, very few people can actually get the tax break in the first place, which makes this point almost ludicrous.
Is There a Tax Disadvantage to Paying Off Mortgage?
To be absolutely clear here. You’re paying $12k to the bank to get a $3k tax deduction. You’re costing yourself $9,000 a year to keep the mortgage. If you pay off the mortgage, you won’t pay interest, which saves you $12,000 a year, but you WILL need to pay extra taxes to the tune of $3,000.
So yes, you need to pay more taxes, but you’re still saving yourself $9,000 by getting rid of your mortgage.
Is there a tax disadvantage to paying off your mortgage?
Yes, but the savings in interest makes it well worth that disadvantage.
After walking through all the reasons not to pay off your mortgage and calling out why most of them are crap, what is the actual downside of paying off your house? Why do some people say that you should never pay off your mortgage?
The main reason to not pay off your mortgage is that you won’t have as much discretionary income as you would have otherwise. So, you’ll have to sacrifice some time, some nights out, and maybe even a couple fun trips.
But what does it mean? What are the reasons to pay off your mortgage early? It means a whole lot more fun for the rest of your life (we’ll touch on all the reasons to pay off your mortgage later in this post).
Is Paying Off Your Mortgage a Good Idea?
Is it beneficial to pay off your mortgage? Is it wise to pay off your mortgage early?
Let’s break this down into one simple question here. “Is paying off your mortgage a good idea?”
For 95% of the population, I’d say yes, paying off your mortgage is a good idea.
It’s a guaranteed earning on your money (by not having to pay interest), and like we said earlier, if you’re interested in paying off your mortgage, you’ll probably work harder to pay it off sooner rather than later. You wouldn’t do this with investing, so your return on paying off your house may even be greater than true investing.
Does Dave Ramsey Recommend Paying Off The Mortgage?
Many people ask this question, and honestly it makes me chuckle. Of course Dave Ramsey recommends that you pay off your mortgage! It’s the 6th step in his simple 7 step plan!
According to Dave, here’s all the things you should do before you pay off your house early:
- Save up a mini-emergency fund of $1,000
- Pay off consumer debt (essentially anything that’s not mortgage debt)
- Build up a true 3-6 month emergency fund
- Invest in retirement
- Invest in your kids’ education
Then it’s time to pay off the house. And after that, he states that you should live freely and give!
Honestly, it’s a great financial plan, and it’s super simple! My wife and I became millionaires by 35 on this plan. The best part is, it can work for anyone!
Does Paying Off a Mortgage Make Sense?
So when does paying off the mortgage make sense? Does it always make sense? Or are there times when you shouldn’t pay off your mortgage early?
According to Mr. Ramsey, if you get through the first 5 steps, then you should absolutely work to pay off your mortgage early.
I’m not entirely in that camp.
There are some people that are very lukewarm about paying off their mortgage. They’d much rather invest than put extra money into their low-interest mortgage. I don’t blame them, and I wouldn’t push them to pay off their debt if they don’t want to.
However, for people that really want to pay off their mortgage, I’d suggest that they go for it! It still makes sense financially because you’re saving money in interest. And, it makes sense emotionally because when the mortgage is paid off, you’ll have that weight of debt lifted off your shoulders!
When should you pay off your mortgage? Is there a target age?
I’d say most people are ready to buy their first home by age 30.
- You’re done traveling the world,
- you’re likely on a career track,
- and you may even be in a relationship and having kids soon. It’s the perfect time to settle down and buy a house.
If you take out a 30-year mortgage, then you should have your mortgage paid off by age 60 (at most).
(Please don’t be one of those people that continues to refinance and extend your mortgage. I doubt you want to have a debt hanging with you into your 70s…)
For the wise individuals that are interested in saving money on interest, I’d suggest buying a modest home and taking out a 15-year mortgage. This means that you’ll have your mortgage paid off by age 45.
Still others might tackle their debts head-on and work to pay off their mortgage before their 40th birthday. Many won’t, but for those that do, they’ll be set up for a financially successful future.
So what’s a target age for paying off your mortgage?
I’d say 45 or younger. It’s achievable, and it will set you up for chunking a ton of money into retirement AND potentially paying for some of the college tuition for your kiddos!
What Are The Pros and Cons of Paying Off Your House?
So what are the real pros and cons of paying off your house?
First, the cons:
- You won’t have as much discretionary money, which means less fun today
- Putting money into your mortgage also means that you may be investing less
Those are basically the only downsides.
So what about the pros of paying off your house?
We’ll outline those below. We actually found 25 reasons for paying off your mortgage early! Scroll down, have a look, and pay off that mortgage! 🙂
Is It Better to Pay Off The Mortgage Or Keep Money?
What about paying off the mortgage vs. saving money? When should you save up money instead of paying extra on the mortgage?
These are the times you should save up money and NOT put extra money toward the mortgage:
- If you don’t have 6 months of costs saved up in your emergency fund
- If you still have consumer debts
- You’re not saving anything for retirement
- You’re not saving anything for your kids’ college
- Or, if you think you may be at risk of losing your job
This seems like a lot of events where you should save instead of paying down the mortgage, but the first four bullet points are just getting yourself into the financial position to start paying down the mortgage. The last bullet point is more about if you should stop paying extra on the house.
If ever you feel like your income is at risk or if your expenses are going to jump through the roof, feel free to stop paying extra on your mortgage and save the money instead. There’s certainly nothing wrong with that!!
The Most Brilliant Way to Pay Off Your Mortgage
Now this is a fun one.
When you look at all the reasons to pay off your mortgage, I absolutely agree that most people should pay off their mortgage early. What I don’t often talk about is how they should do it!
Here’s the most brilliant way people should pay off their mortgage:
- Do it as quickly as possible (while still having somewhat of a life)
- Increase your income with a better job or a side hustle
- Decrease your expenses by cutting back on the extras (subscriptions, out to eat, convenience purchases, etc.)
- Consistently put extra toward the mortgage (at least once per month) – the more you can pay off early, the more money you’ll save in total
- For the extra dollars, be sure to put them toward the principle – this means you’ll never pay interest on the amount you pay off
- You don’t want to just pre-pay your mortgage to a later date. This doesn’t save you any money, it just allows you to not pay your mortgage for a while.
- For the extra dollars, be sure to put them toward the principle – this means you’ll never pay interest on the amount you pay off
And that’s really it!
Pay your house off fast, and do it by putting all your extra payments toward the principle. Sounds simple, but it’s certainly effective!!
Life After Mortgage Is Paid Off (Our personal story)
So what is it really like to have a paid for house?
If you’re wondering what life is like after the mortgage is paid off, I can tell you. We’ve been completely debt free for over 7 years now.
I met Liz when I was 27 years old. I had recently paid off my student loan debt, and I was nearly done paying my ex-wife for half of our estate (we got divorced 6 months prior). After that, it was time to tackle the home mortgage.
I started the task of paying off my mortgage on January 1st, 2014. There was $54,500 left. My goal was to pay it off in just one year. Long story short, I did it. I paid off the mortgage on December 11, 2014. It was one of the greatest feelings I’ve ever had.
- The final payment was just over $14,000
- I clicked the button and watched the balance go to zero
- Then, I did what Dave Ramsey always suggested – I took my shoes off and walked into the back yard – my backyard. Not the bank’s. Mine! My now-wife even took a picture to capture that monumental day.
It’s true. The grass did feel different. I paid off my mortgage before my 30th birthday. Every stud, every piece of drywall, the hardwood floors, the back porch, the new kitchen appliances. They were all mine. Nobody could take them away from me.
There was suddenly a sense of security there, of freedom. It’s hard to describe, but man was that a weight lifted. Nobody owned me anymore. No one!
Living In a Paid Off House
We lived in that house for five more years after that. With no mortgage, we saved up a ton of money, and FAST! She and I both worked and we had no kids. Within just over a year, we had over $90,000 in savings. (I know, it sounds fast, but that’s what can happen when you have absolutely NO payments!)
We soon bought a rental house with cash (that we still have today). Then, a couple years later we bought another house with cash and flipped it (and earned more than $25k on it!). Then, we sold our primary house and bought a larger home on 6 acres. We have lived in that home debt free for roughly 3 years now. It has simply been amazing.
It’s absolutely peaceful, inside and out. My wife and I rarely talk about money. If we crash a car or the furnace breaks, we don’t freak out. We don’t fight about it. We just pay the bill and move on. It is truly an incredible place to be. I highly recommend complete debt freedom to anyone! This simple paragraph is one of the top reasons to pay off your mortgage in my opinion. But…there are other reasons too! Keep reading to see the full list!
25 Reasons to Pay Off Your Mortgage
So now for the actual reasons to pay off your mortgage. I’ve already hinted toward a few of these, but this is the all-inclusive list right here!
If you want to pay off your mortgage and wish to point to a few reasons to tell all your nay-sayer friends, here you go!
1) Save on Interest Payments
This one is the most well-known reasons to pay off your mortgage. Many people do it so they don’t have to pay so much stinkin’ interest!
Imagine you just signed up for a $300,000 mortgage at 5% interest (which would be a steal right now!) with a 30 year term. Guess how much you’d pay in interest over that 30 years?
That $300,000 house is costing you almost $600,000 by the time you make that final payment.
Based on my mortgage payoff tool, here’s what that payoff would look like:
What if you were able to work a side hustle or cut back on your expenses and put an extra $1,000 dollars a month toward your mortgage? How much would that change your mortgage payoff?
Let’s have a look!
Check THAT out!! By putting an extra $1,000 toward the mortgage, instead of paying it off in the standard 30 years, you’d get rid of your mortgage in just 13 years! AND, you’d save $170,600 in interest!
That’s a heck of a reason to pay off your mortgage early!
2) It Likely Makes More Financial Sense
A few years ago, mortgage rates were less than 3%. And, the economy was doing well enough that it was pretty easy to earn greater than 3% on your money. It didn’t make a ton of sense to pile money into your mortgage at that time.
However, now we’re facing mortgage rates of nearly 6%!
Do you know an investment that makes a guaranteed 6% on your money? There aren’t many out there. BUT, if you pay off your mortgage early, you’ll be guaranteed to “earn” that 6% by never owing on it!
I don’t know about you, but a guaranteed 6% sounds pretty sweet to me!
Too many people go to the bank and ask, “How much house can I afford?”, and then they proceed to spend that entire amount on the nicest house they can find.
Little do they know that the bank agrees to hand people the most amount of money possible without them defaulting. Meaning…if the home-buyers use their maximum allotment on a house, they can afford to make the mortgage payment, but they can afford to do little else.
If you buy the most house that you can, you essentially become house poor, because while you have house, you don’t have money to do anything else! You’re poor outside of that magnificent house you bought!
Want to stop being house poor?
Either pay off your house early (by earning more and cutting way back on expenses), or sell it and get something more reasonable!
4) Have Money to Properly Maintain Your Home
No matter what kind of house you own, it will require maintenance and repairs. If you spend too much on your mortgage, you’ll have a tough time keeping your home looking good and functioning as it should.
Don’t be this person. A great reason for paying off your house is so that you’ll have the funds to actually have a nice roof, have air conditioning, and maybe even some heated floors someday!
5) Have Money to Furnish Your House Nicely
Big nice house…crappy Craigslist furniture.
I’ve seen it, and maybe you’re doing it.
If you’re going to flash your nice house and nice cars, you might want to back it up with a nice inside as well. After all, you’d like to actually invite people over to your house right? That’s why you paid up for a nice one!
If you need to free up some money to furnish your house nicely, maybe you’d like to just get rid of the mortgage entirely first! You’ll certainly have more dollars once the mortgage payment is gone!
6) Have Money to Add Onto Your House Later In Life
When you buy a house, it’s only natural to want to make updates after a few years. The typical way people do this is to take out a loan – either through the bank as an improvement loan, or they refinance their house. But, let’s be real, both are loans that you need to pay back over time.
What if, instead of taking out loans to add on to your house, you actually pay off your house first and then save up for the improvements with cash?!
It sounds crazy, and you might think it would take forever to do this, but if you make it your focus, you’d be surprised how quickly you could actually do it!
When I was paying off my first house, I paid off $54,000 in 11 months while earning just $60k a year at my day job!
The math doesn’t even make sense, but I cut wayyyy back on my expenses and took on extra side gigs, and I made it happen! By paying off that mortgage, I became completely debt free before age 30!
When you own just 5% of your home, you don’t tend to take care of it the same way as if you owned 100% of it. That’s just the way it is.
Believe me, once you own your house in its entirety, you start to think about it differently.
You’ll decide to…
- update the exterior paint,
- give the front porch a facelift,
- refresh your home with plants,
- update it with better lighting, etc. etc. etc.!!
When you pay off your mortgage, your feelings about your house begin to change. You know why? Because it’s YOURS. Not the bank’s.
8) Get Rid of the Hassle of the Monthly Payment
This was one of my most hated things, and it was at the top of my reasons to pay off the mortgage. That fricken monthly payment.
Every single month I had to think about how much money was in the checking account, and was it going to be enough to cover that mortgage payment when the 1st of the month rolled around.
- What if some emergency came up?
- What if I had other bills to pay?
- Would I have enough to cover that mortgage payment?
Then, when that mortgage payment came out, it was like all my hard work during that month was for nothing! I just never made any progress on my savings. Money came in but it all went out – mainly because of that honkin’ mortgage payment!
When my mortgage payment went away, I was shocked how quickly my savings account grew! After just a few months, I had an extra $10k sitting there. Then I had a new problem — figuring out what to do with all my excess dollars! Now that’s a great problem to have!
9) Never Have to Worry About Making Two Mortgage Payments
Ever thought about what you’ll do when you want to buy a different place and move?
Typically, you have two options:
- Put in an offer on the new house, but make it contingent on your current house selling
- Buy the new house and take on the mortgage payments, which means you’ll have two mortgage payments until you sell your old house
In a hot real estate market (when there are way more buyers than sellers), the first option doesn’t really exist. If you put an offer in that may not solidify for weeks or months (until your house sells), the seller will likely reject your offer immediately and continue accepting the other 10+ offers that are coming their way.
That leaves you with having two mortgages for an unknown period of time. That’s a bit unnerving…
But what if you owned your current home free and clear? It’s one of the top reasons to pay off your mortgage in my book.
By having a paid-for home…
- it makes getting financing incredibly easy,
- the offer on the new home and the sale of your old home become way less stressful,
- your bank account will remain healthy no matter how long it takes to sell your old house,
- and, because you’re able to wait for the best offer, you’ll likely sell your old home for more money (instead of panic-selling to the first bidder that comes along)!
I would never want two mortgages. It’s just too stressful!!
10) Stop Paying Into Escrow
This was one of my most hated things…having the bank “help me” pay my property taxes and home insurance.
With their “help”, I was forced to pay too much into an account that always had a couple grand sitting in it as a buffer, which of course earned me no interest and I was never able to touch the excess.
When I paid off my house, I was paid a healthy check for what was left in the escrow and I never had to deal with those overly-conservative bankers ever again. Thank goodness!
11) Save Even More Money by Negotiating Your Home Insurance
The other annoying part about the bank-mandated escrow was how hard it was to save money on insurance!
When I was trying to hard-core cut my expenses a few years ago, this is the process I had to go through to change my home insurance provider:
- Call around to the various home insurance agents, get quotes
- I compared quotes and chose what I thought was the best option
- Then, I had to call the bank and let them know that I wanted to change insurance providers (since they managed the escrow, they needed to approve the change)
- They then gave me the run-around and I got tired and honestly quit trying… I assume they would need to talk with the insurance provider to make the final changes, but I never got there… I just paid the mortgage off and quickly changed the insurance myself.
Needless to say, the process was painful.
When you don’t own your house fully, you’re often handcuffed from making these decisions. Yet another reason why I suggest paying off your mortgage!
Want some more reasons to pay off your mortgage? I have plenty.
(By the way…are you convinced yet? If you are, be sure to check out this post for how to pay off your mortgage fast!)
When you’re paying the bank a certain interest rate and the majority of your payment goes to interest, you can’t help but watch the interest rates to potentially refinance in the future.
If the rates go down, you’re wondering if it’s worth paying the up front processing costs and how long it will take to break even on your dollars.
This takes mindshare away from the more important things in life, AND it’s emotionally taxing to continually think about over and over again…for YEARS!
It’s just not worth it in my opinion. Instead of wasting all your efforts to pay more up-front money just to get a lower monthly payment, why not just pay off the mortgage and not worry about it for the rest of your life??
13) Increase Your Net Worth With Your Home Equity
I’ve heard the following phrase from dozens of people in my life…
“I’m going to refinance, pull some equity out, pay off all my high-interest consumer debt, and then NEVER go into debt again.”
…And then guess what they do in just a few months? They buy something stupid like a new car or a boat…
Because they had a few extra bucks from the refinance yet, AND because they never really felt the pain of paying off that debt.
It was too easy to refinance and pay off the debt. So, in the end, they’re left in a far-worse spot financially with more debt on the mortgage, more consumer debt, and an even longer amount of time before they’re debt free.
So what’s one benefit of paying off a home mortgage?
It’s kind of like a forced savings account.
- You pay off the house
- It’s worth a few hundred thousand dollars
- It continues to go up in value
- And, unless you head to the bank and get a brand new loan on your home, you’ll never cash out of your house until you retire and downsize.
14) Free Up Money for Kids’ Education
I bet you have this pressing thought once in a while… You feel the need to save money for your kids’ future college costs, but you always feel like there’s just nothing left at the end of the month?
Well…what if you didn’t have a mortgage payment? I bet you could start contributing something to your kids’ education!
Sure, it may take a while, but wouldn’t that just be amazing to be completely debt free and use your money however you please? (Rather than paying all the people back that you’ve borrowed from years ago.)
15) Free Up Money for Retirement Investing
On that same note, what about your own retirement? Are you saving enough for your later years? Or is that mortgage payment sucking you dry each month?
If you paid off your mortgage by 45 (while investing mind you), imagine how much extra you could load up into your retirement over the next 20 years of your life! Hundreds of thousands of dollars for sure!
16) Creates a Clear Path Toward Financial Independence
The typical financial advisor recommends that people do all these things at once:
- Contribute 10% to your retirement
- Don’t invest in just one stock, spread the money around, but perhaps in multiple mutual funds that vary in company size, sector, and region.
- Invest a percentage to your kids’ college 529 plan (again, with complex investment advice)
- Keep 0% interest loans (like student loans right now)
- Keep your low-interest mortgage, refinance if it goes lower
- Pay off your high-interest debt
- Invest in rental properties using the banks’ money (ie. more loans)
- Put your savings into a higher-yield investment
- Reduce your tax exposure with write-offs, interest, and deductible investments
- Etc. etc. etc.!!!
It’s just too much. The average person gets lost before bullet #3 above.
It’s often for people to just keep their finances as simple as possible.
- Pay off all consumer debt
- Invest in index funds modeled after the S&P 500
- Pay off your house
Then after that, feel free to get creative. But, with these simple steps, people are far more likely to succeed.
So of the top reasons to pay off your mortgage, this one certainly makes my list since it makes your financial goals clearer, easier, and therefore more likely to be achieved!
My wife and I have been mortgage free for nearly 7 years now. Before the mortgage was paid off, we were pretty hard-core budgeters…because we had to be. There wasn’t that much extra money to go around, so we had to be very intentional about what we were spending on in those days. If we didn’t, those dollars would have just slipped through our fingers and we never would have paid off our house!
Today, our lives are much different.
- We don’t have a monthly budget meeting
- I never ask my wife if we have money for an upcoming purchase
- When we go to the store for groceries, we buy what we want to without thinking about price tags. It’s fabulous.
And yet, our savings account continues to grow…
How is this possible?
First off, we don’t have a $1,500/month payment to worry about, so that gives us a lot of flexibility.
Second, with a paid-for house and a very relaxing life, it has become easy to be content with what we have. We don’t hunger for a shiny new car. We don’t aspire to get a 10,000 square foot mansion. And, we don’t really want to save up and travel the globe.
We live in a beautiful place in the world, and we are blessed beyond measure. There’s no reason to continue reaching for the bigger and better. We believe we already have it in the peace and serenity of our every day lives.
We don’t worry about a budget because we know we’ll never spend enough to make it a concern.
And not having those budget meetings…It has been AWESOME!!
18) Be Able to Take More Financial Risks In Life
If you’re in your 30s or 40s, I’d say that this is probably within the top 3 reasons to pay off your mortgage. Read on and you’ll see why.
When you’re deeply in debt, any type of change seems super risky.
Let me illustrate with an example.
Let’s say you have a family, just $500 in your savings account, and $250,000 in personal debt. You want to do these things:
- Invest money into your company stock program.
- Switch jobs from a large secure company to a new start-up.
- Borrow $100,000 to buy a rental home investment.
- Take your virtual assistant side hustle full-time and quit your safe, secure job in the process.
Sheesh. What risky options!! You’re looking to invest money when you have a ton of debt already. You’re thinking about quitting your safe job that provides you with an income and benefits, and you only have $500 in the bank! AND, you’re looking to borrow another $100k? What are you thinking?
Seems sooo risky…
But, let’s flip this script a little bit.
Let’s say you have a family, $100,000 in your savings account, and NO personal debt. You want to do these things:
- Invest money into your company stock program.
- Switch jobs from a large secure company to a new start-up.
- Borrow $100,000 to buy a rental home investment.
- Take your virtual assistant side hustle full-time and quit your safe, secure job in the process.
The above things…They’re exactly the same as they were before, but suddenly they seems way less risky, don’t they? In fact, they almost seem smart!
- You could put some of your savings to work by investing in your company at a discount
- That start-up company will pay you less, but will offer equity in the company as additional payment. If the company takes off in the future, you could really win big!
- Borrowing money at a low interest rate for a rental, while keeping cash in your account…this could be smart. It leaves you open for other opportunities.
- Ditching your corporate job and trying to grow your own company into a monster. That could turn into a HUGE financial win as well!
When you ditch your mortgage, you’ll be more likely to take financial risks. And you know what? They could pay off BIG TIME! And, even if they don’t, you won’t experience financial ruin. Just a minor setback while you find a new way to make money. All while surviving on your savings and still making no payments toward debt. 🙂
What is it that people say when you sign the dotted line on your mortgage? “Time to sign your life away!”.
It’s daunting. It’s a big deal to sign up for payments that could last 30 years. That’s nearly all of your adult life before retirement!
But, you don’t need to live a daunting life. You can pay off your mortgage early and enjoy a carefree life instead.
Which leads me to my next point…
20) Peace of Mind – The House is Fully Yours
While many of the reasons to pay off your mortgage are financial, there are psychological benefits of paying off a mortgage as well!
The biggest one is simply “peace of mind”.
There’s a huge fear surrounding mortgage payments.
- What if you lose your job and can’t make your payments? Could the bank take your house away?
- What if you have a bad accident and can no longer support your family the way you once did? Will you lose your house?
- Maybe the whole economy takes a dive and you just can’t help it. The work isn’t there. You can no longer make the house payments…
You never know what’s going to happen in the future. Even if you feel confident about your work and your ability to make the mortgage payments, there’s still a nervousness inside of you that wonders what would happen if you defaulted on your mortgage.
When you pay off the house. There’s such a warm peace that comes over you. It’s truly astonishing. Just that feeling of knowing that no one can take your house away…it is so powerful. It’s absolutely one of the best reasons to pay off your mortgage.
That peace of mind. You’ll never want to go into debt again after you’ve experienced it.
21) Have a Better Relationship With Your Spouse
This has certainly been the case for me and my wife, and I bet it’s the same with many other people as well. After all, what are most arguments centered around? Money!
If you don’t have any debt and actually have some money stashed away, guess what? You pretty much stop arguing.
22) Allows You to Dream Bigger
When you’re trapped under the weight of debt and payments, it’s hard to think about investing and dreaming big. All you can think about is surviving that day, that week, that month. Heavy debts don’t often aspire people to think about how great they could be, about the riches they could acquire, about the tremendous purpose they could have in the world!
If you want to be great, I’d suggest getting rid of your consumer debts, and likely your mortgage debt too! It’s amazing how much more clear you can think when you remove debt out of your life!
Some people just can’t fathom this, but it’s something that’s totally possible if you have absolutely no debt.
Let me explain with another illustration.
The normal human being with debt:
- Income: $100,000 a year
- Home loan: $24,000 a year
- Student loan: $10,000 a year
- Car loan: $6,000 a year
- Credit card interest: $5,000 a year
But what if you paid off all your debts?
The debt free human being:
- Income: $100,000
- Debts: $0
Instead of paying $45,000 in debts every year, you could just put that into savings. After four years of stashing cash, you would have $180,000 saved up!
Where I live, that could buy you an entire rental house!!
Get rid of your house payments, and you could be buying rental houses with cash. Pretty cool!
24) Allows You to Give More
Did you ever come across a cause that was just truly inspiring? One that you wanted to give thousands of dollars to…but you didn’t have thousands of dollars…so you gave nothing?
Wouldn’t it be nice to be completely debt free and just give to charitable organizations on a whim?
This is one of the BEST reasons to pay off your mortgage. Without that mortgage payment each month, you can decide to give more. WAY more.
25) You Can Be An Example to Others That It IS Possible!
I have heard so many people say that they’ll always have a house payment, or they’ll always have a car payment. They’ve talked themselves into making this a reality for life. But it doesn’t have to be that way.
There are plenty of people in this world that don’t have car payments. They don’t have house payments. In fact, they have no payments at all. They own what they have free and clear and they’re happier for it.
If you get fully out of debt, you can be an example for those that think it’s just not possible!
I love it when I can open peoples’ eyes to what’s possible in this world, even on a fairly low income. Almost anybody can get out of debt and become rich. They just have to be driven and disciplined for a few years, and their whole life could be turned around!
Looking back, one of my top reasons for paying off my mortgage would be to help others do the same!
After All These Reasons to Pay Off Your Mortgage…Are You In??
So what about you?
You just read this amazing post with 25 reasons to pay off your mortgage. Are you sold on the idea? Are you willing to take the next step?
I’d recommend downloading my mortgage tool from Etsy, not because it’s mine to sell, but because I believe it’s the best tool out there to get you motivated to pay off your house and be completely debt free!
Here’s what you can do with my mortgage payoff tool:
- Enter your specific mortgage numbers, no matter where you are in your mortgage payoff journey
- Put in extra payment amounts to see how much faster you could pay off your mortgage
- And, you can even enter in a goal like, “paying off the house in 5 years” and the tool will show you how much extra you need to pay!
It’s time to be mortgage free! Are you ready?? What are your reasons to pay off your mortgage? Tell us in the comments below!
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.