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My wife and I have been paying down the principal on our $200,000 mortgage for almost four years now. The balance currently sits at $20,000. We are knocking at the door of mortgage payoff paradise!
I’m not sure if it’s the fear of the unknown or me just caving to the skeptics, but I’ve been thinking a lot more lately if paying off my mortgage is the right thing to do.
We’ve been investing in the stock market during this almost 9-year bull market, but we could have been investing more if we weren’t so focused on paying down the mortgage.
My wife Nicole and I are interested in investing in rental real estate. We could have had 2 or 3 properties by now if we hadn’t been making such large extra principal payments.
Should I have picked a different path?
And then I think …
“Forget all that, Andy!!! Stick to your guns. You’re doing the right thing for your family. I haven’t heard of one person who regrets paying off their mortgage. Go for it!”
“You’re welcome, Andy”
Wow. That Andy guy is a good motivator. I’m fired up!
To keep me motivated and remind myself why it’s a freakin’ great idea, I’ve compiled a list of 8 reasons why paying off the mortgage is a smart move for my family:
1. Decreased Annual Living Expenses
According to the US Department of Labor in 2016, the largest expense in the typical American family’s household budget is their mortgage or rent. Imagine that being completely wiped from your annual expenses. What a weight off your shoulders!
Since our mortgage and the extra principal payments were around 35% of our living expenses last year, we’re going to be breathing MUCH easier when this mortgage is gone.
2. Complete Debt Freedom
In 2011, we paid off all of our $48,000 of consumer debt. With no mortgage in December, we’ll be completely debt free. The fact that we won’t owe anyone a dime will be completely liberating. You can’t put a price on that.
ARCHIVES: 15-Year Mortgage Paid Off in 5 Years https://t.co/b1CblaZ0dj— Andy Hill (@AndyHillMKM) September 8, 2017
3. Increased Savings Rate
With no house payment in 2018, we’ll be able to save 50% of our income. That is huge for us. In the beginning of our marriage, we were living for today, spending what we wanted and we were happy … until we realized we were broke.
Having a large cushion of savings, built up retirement accounts and a development of income-producing assets will also make us feel happy … just in a different way.
4. Increased Net Worth
When you don’t have debt, you avoid the negative drain on your net worth.
When we started this journey of financial betterment in 2010, we had a -$50,000 net worth. Yes, that’s a negative symbol.
7 years later, our net worth has grown to $650,000 through simple investing strategies and focused debt destruction. Without a mortgage, our net worth will continue to climb.
(We track our net worth through a free service called Personal Capital).
5. Have More Freakin’ Fun!
My wife loves to do design projects in our home. I love vacations. With more available income, we’ll be able to enjoy life and reward ourselves for our diligent savings.
Getting out-of-town during our Michigan winters will be a must for this family in 2018. Brrrrr!
6. Reduced Stress
I don’t know about you, but I stress about the size of my mortgage. I worry about having such a large payment each month.
When our $1,300 (w/o taxes and insurance) payment is gone, my stress level will decrease dramatically.
Sure. There will still be other bills I’ll have to pay for the rest of my life, but none will ever be as large as my mortgage.
(We worked with LendingTree to secure a 3% interest rate on our 15-year).
ARCHIVES: What Our Mortgage Freedom Looks Like at 35 https://t.co/CZdas2wESh— Andy Hill (@AndyHillMKM) September 6, 2017
7. Ownership Pride
The fact that Nicole and I will own our home outright fills me with so much pride. The peace of mind that comes with true home ownership will be incredible.
I will NEVER lose my home. That’s fun to say.
8. Easier Path to Financial Independence
With a paid off mortgage, we don’t have to save as much money to reach financial independence. Our expenses will now be significantly lower.
If we can earn $5,000 per month in passive income, we’ll be financially independent. More time with our kids. More time spent doing what we want to do.
The areas where we are planning to focus are …
- Buy-and-hold rental real estate
- Growing this blog and podcast
- Investing in a taxable brokerage account
I’m not insinuating that people shouldn’t focus on passive income before they’re debt free. In fact, I’d highly recommend it! If you’re in your 20’s and you want to get into rental real estate, more power to you. Have a small business idea that allows you to follow your passion and provide for your family? Go for it!
Nicole and I have had a lot of trial and error to get where we are today. The knowledge that we’ve gained from that trial and error is priceless.
In the end, the plan to pay off our mortgage has worked out very well for our young family. Being mortgage free at 35 will be a family tree changing moment for us.
I hope you find a path that works well for your family too.
What reasons do you have for paying off your mortgage?
Or what reasons do you choose not to pay it off?