10 Compelling Reasons to Pay Off Your Mortgage Early

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There are so many opinions on whether or not you should pay off your mortgage early. 

Some say that paying off your mortgage is a bad idea because you could make a lot more money in the stock market. With the bull market over the past decade, there’s a lot of truth to that. 

And others appreciate the peace that comes with not owing anything to the bank each month. The benefits that come with that freedom are hard to deny as well. 

So, what’s the right answer? 

I’m not sure there is one. I think only YOU can answer decide what’s best for YOU. 

In 2013, my wife and I decided to pay off our $200,000 mortgage in less than 5 years. It was an aggressive decision and one that required a lot of partnership and dedication. But we did it … together. And we’re so glad we did. 

That was a personal choice and it was best for our family. 

If paying off your mortgage sounds interesting to you, here are 10 compelling reasons to consider it. 

1. Decreased Annual Living Expenses

According to the US Department of Labor in 2018, 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!

That would leave you more money for fun, vacations, investing for the future, contributing to your kid’s college funds and so much more. 

Since our mortgage and extra principal payments were around 35% of our living expenses, we are breathing MUCH easier with our mortgage gone.

2. Makes Saving for Retirement Easier

Before paying off our mortgage our annual expenses were around $75,000 per year. With that type of lifestyle, we would need to save around $1,875,000 to retire comfortably using the 4 percent rule

By removing our mortgage from the equation, our annual expenses are now around $60,000 per year.  In theory, this means we only need to save up $1,500,000 for our retirement to live our current comfortable lifestyle.

Now there are a lot of factors that can throw that convenient math problem off (inflation, lifestyle change, etc), but when all is said and done, it’s going to be easier for us to retire. $375,000 easier!

3. Increased Savings Rate

With no house payment, we’ve been able to save around 50% of our income. That is huge for us. 

At 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. And without a mortgage, this is doubly true! 

When we started our journey of financial betterment in 2010, we had a -$50,000 net worth. (Yes, that’s a negative symbol). 

We owed A LOT more than we owned. I owed more on my home than it was worth, had $30,000 of student debt and I was spending more than I was earning. I even bought my wife’s engagement ring with my student loans! 

9 years later, our net worth has grown to $850,000 through simple investing strategies, increasing our income and focused debt destruction. Without a mortgage, our net worth continued to soar.

(We track our net worth through a free service called Personal Capital). 

5. Have More Fun

My wife loves to do design projects in our home. I love vacations. With more available cash flow, we’ve been able to enjoy life and reward ourselves more lately.

Nicole has been able to update our laundry room, buy new furniture guilt-free and we even got the big screen TV we always wanted.  This home now feels like a palace and it’s ours!

We’ve traveled a lot more as well. Disney World, Cabo San Lucas, Los Angeles, Ft. Lauderdale and many trips to Northern Michigan have been some of our favorite destinations since paying off our mortgage.  

While some of our trips were supported by credit card rewards, having the extra cash available has helped us travel without restriction. Getting out-of-town during our Michigan winters is now a must for this family. 

Credit Card Rewards, Travel Hacking, Family Vacation
The Hill Family in Cabo San Lucas – Our future looks bright!

6. Reduced Stress

I don’t know about you, but I really stressed out about the size of my mortgage. Having such a large payment each month made me feel worried. 

“What if I lose my job and we’re not able to make the payments?! 

“Or what if I get a new boss and he’s a complete jerk, but I can’t leave because of the mortgage?!”

These were real reoccurring thoughts I had. And I couldn’t just tell myself to calm down or not think about it. (Believe me, I tried. The Calm meditation app has become a good friend of mine lately!)

When our $1,300 (w/o taxes and insurance) payment was gone, my stress level decreased dramatically.

Sure … There are still other bills we have to pay for the rest of our lives, but none will ever be as large as our mortgage.

(FYI:  We worked with LendingTree to secure on our 15-year mortgage. Having a shorter-term mortgage helped a lot because the principal payments were much higher each month).

7. Never Worry About Refinancing Your Mortgage

You know when the interest rates drop and all you hear is chatter about refinancing your mortgage? Well, when you don’t have a mortgage, you don’t even have to wrestle with the decision of if you should refinance your mortgage or not.

That is one less decision you have to make FOR THE REST OF YOUR LIFE!

There are major benefits to reducing the number of decisions you need to make in your day. You’ll be more productive, your mind will feel more clear and life can feel easier. 

8. Ownership Pride

The fact that Nicole and I own our home outright fills me with so much pride. The peace of mind that comes with true homeownership is incredible.

Andy and Nicole Hill - Family Photo

I’ve even found myself standing on my front lawn staring at my house and saying, “That’s our house. We own all of it. My kids will always have a place to call home.”

Those statements are REALLY fun to say.

9. Design a New Lifestyle

I’ve had the chance to interview dozens of families on my podcast who have paid off their mortgage. One of the most impressive things I’ve learned about how mortgage freedom has changed things for them is with their overall lifestyle design. 

Many have gone from working full-time jobs to just part-time jobs. Now that they don’t need as much money to live, they don’t want to work as much. How cool is that!?!

Others completely changed career paths altogether. It’s as if they now had the confidence and financial cushion to make bolder lifestyle decisions. That’s what mortgage freedom did for them. 

10. Easier Path to Financial Independence

With a paid-off mortgage, you don’t have to save as much money to reach financial independence. Your expenses are now significantly lower.

For example, if your family spends $60,000 to live each year and then pays off your mortgage with a $1,000 payment per month, your new annual living expenses are only $48,000.

That means, you now only need to create $4,000 of passive income earnings to become financially independent. 

How can you get there? Here are 3 of my favorite passive income-producing routes:

  1. Buy-and-hold rental real estate
  2. Investing in a taxable brokerage account
  3. Affiliate or advertising income through a blog

I’m not insinuating that people shouldn’t focus on passive income before they’re mortgage-free. In fact, I’d highly recommend it!

If 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 has been 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 was a family tree changing moment for us.

I hope you find a path that works well for your family too. 


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What reasons do you have for paying off your mortgage?

Please let us know in the comments below.



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.

30 thoughts on “10 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.

  8. I believe paying your mortgage is absolutely the right way to go Andy. I have several years ahead of me but last year I paid a big lump sum to reduce my balance. I don’t regret it a bit and look forward to the next lump sum payment that will take me closer to freeing myself from that debt. The sooner your mortgage is paid, the sooner you have an asset and not a liability!

  9. Hi Andy,

    I’m a real estate Broker in California. My experience with buyers (having helped hundreds purchase a house) is they routinely borrow as much as the bank says they can ‘afford’. Banks don’t know what you can afford, only how much they can lend you. It doesn’t mean you are going to like living with that mortgage payment. A buyers happiness is not a factor in their equations. What you can afford on a house has more to do with the kind of life you want to live and what you value most. I appreciate your sentimentality surrounding home ownership as I once felt that way. I have seen (and made) poor choices surrounding house purchase decisions that are fueled by these sentiments. The statistics are that 78% of working Americans live paycheck to paycheck and half of all marriages end in divorce. I’m convinced there is a connection.

    When house shoppers are in house hunting mode, they somehow feel they are buying the life they dream of and the time, money and energy to live it. In fact, I have found that by over committing resources to a house they are, in fact, undermining what they want most. A happy home.

    The best shot for paying down that mortgage early, is don’t get into too much mortgage in the beginning.

    I enjoy your posts. I think you are giving good advice at an important time as young families invent themselves.

    Bill

    1. Thank you for that feedback Bill! Being a real estate agent, I’m sure you’ve seen a lot of home purchases and a lot of mistakes as well.

      My first home mortgage took up around 70% of my income each month … I hated living like that and vowed to never do it again.

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