You will often see articles on how to payoff your mortgage early. People seem to make up their minds it’s the best course of action.
What about the question: Should I pay off my mortgage early? Here is my take on both sides of the argument.
Reasons NOT to payoff a mortgage are: It’s an inflation hedge, you can write off the interest, maintaining liquidity is important, and the money would be better off invested in higher yielding opportunities. Good reasons to pay off a mortgage include peace of mind and primary residence equity having special protection from creditors and bankruptcy in many states. Poor, but often cited reasons to pay off the mortgage are decreasing expenses and gain a risk-free return equal to the interest rate.
I rushed through listing these answers. I go into more detail below.
Before You Payoff a Mortgage Early
We will assume you have an emergency fund, your high interest debt like credit cards is paid off, and you are fully maxing out all retirement savings account opportunities.
This means you are contributing the max to your IRA, your spouse’s IRA if you have one, and your 401K, TSP, or equivalent vehicle. You should not bother paying off a mortgage if you have not done these basic things first.
In the end, I’m partial to keeping the mortgage. I feel like the evidence is strongly stacked against keeping it.
It’s a little ironic, because I paid off my primary residence in 6 ½ years. I also have 20 paid-off single family homes.
Yeah, that’s a little psycho.
This certainly qualifies me, however, to make a fair judgement on the subject.
Since I’m partial to keeping the mortgage, I’ll explore the pros of keeping the mortgage first.