8 Compelling Reasons to Pay Off Your Mortgage Early

8 Compelling Reasons to Pay Off Your Mortgage Early

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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!”  

“Thanks, Andy.”

“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.

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).

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 …

  1. Buy-and-hold rental real estate
  2. Growing this blog and podcast
  3. 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?


Author: Andy Hill

Andy Hill is the host of the Marriage, Kids and Money Podcast which focuses on helping young families build wealth. This 5-star rated podcast was nominated as "Best New Personal Finance Podcast" by Plutus. Andy's advice and personal finance experience have been featured in major media outlets like Business Insider, MarketWatch and NBC News.

26 thoughts on “8 Compelling Reasons to Pay Off Your Mortgage Early”

    1. So glad to hear you say that! Thank you for the encouragement Brad!

      It might have been a low interest rate, but you are guaranteed that you’ll never have to pay it again.

    1. It’s like a domino effect Eric. Once you knock down one debt, the debts that follow are that much easier because of the momentum you’ve built up. I really appreciate the kind words and encouragement. Good luck crushing those student loans!

  1. I’ll admit that I wasn’t so sure about this post when I read the title, but I like your reasons. You are approaching it from the right mindset, and that’s all that matters. And great job paying it off so quickly! Just that alone is something to be really proud of.

    1. Thanks Dylan! There are tons of ways to allocate your money, right? If we educate ourselves properly, we can make the best decision possible that fits our specific situation. I hope your Trail to FI is going well!

  2. When your kids go to college, the FAFSA will create an EFC which is an estimate of the amount of money your family can pay for college. Home equity does not increase your EFC. Money in stocks or rental properties does. If your income is high, it won’t matter much, but it might have helped me out to own my house free and clear instead of having money in mutual funds.

      1. The 529 will count against you on the FAFSA. It is counted as a parent asset and 5.6% of its value is added to your expected family contribution. If you are not already maxing out a Roth-IRAs, they might make more sense than the 529.

          1. The Roth does not count on the FAFSA because it is a retirement account. If someone is not taking advantage of a Roth IRA, it might make more sense than the 529. The contributions (but not the gains) to a Roth IRA can be withdrawn without a penalty.

  3. Congrats on being so close to being done! I think you’ve got all the right reasons listed here. We were aggressively paying down our mortgage before we decided to downsize.

    We recently bought land with cash and plan to build small (1000 sq ft for a family of five). Our hope is to build with a small mortgage and pay it off within a couple years. We’re technically debt-free right now but paying rent. Can’t wait to get to the point where our only housing costs are property taxes and maintenance!

  4. We are paying off our 30 year early, on track for approximately 17 years total. For us, we want to still focus on investing right now, but paying off early will allow us to be mortgage free before our son is in college. Here’s to sticking to the plan!

  5. I think debt payoff is a extremely personal choice. Sure, the numbers almost always work out better in the long run if you invest instead of pay down debt, but it’s the mindset of being debt free and not being shackled. Excellent work!

  6. Andy, this is my current goal in my experiment. We (my wife and I) decided this year to focus on paying off my mortgage for many of the reasons you mention. It’s great to see others have the same doubts (e.g. should I be investing more instead) I’ve been experiencing but ultimately I think it’s the right decision. My current goal is to be completed in 6 years, but I think I can do it significantly faster. #7 is probably the main driver for me and the wife with #2 being a close second. Once paid off, we own our home outright with no debt. Looking forward to your celebratory post!

    1. This is awesome Gabe! You’ll be surprised at how fast it flies by when you have intentionality and automation backing you up. I predict you’ll be done in 5!

  7. Agree with Lance that its a very personal choice. Being debt free at the cost of forgoing a couple of percent extra return you could have had if you chose to keep your mortgage always works for me. It also reflects the mindset of financially independent people who want to live within their means and not spend more than they can reasonably afford.

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