I have never heard a person say they regret paying off their mortgage early. We originally took out a 30-year mortgage on our $183,000 Florida home. Our mortgage is now set to be paid off 10 years early even if we don’t send any extra money to the mortgage company. A recent article by Consumer Reports tried to cast doubt on the impulse to pay off a mortgage early. Even though the writer had some good points about how it’s not always financially advantageous to put money toward a house instead of investments, I don’t regret our efforts to be mortgage free by age 50.
Having no mortgage in retirement
I have a 30-year-old friend who recently bought a new home. I thought to myself that I’d probably do the same thing if I was 30 because my home would be paid off by age 60. However, now that I’m in my 30s, I’d have to take out a 15-year mortgage if I bought a step-up home. I don’t want to set back the hand of time by selling my home and buying another one. And, I don’t even like my neighborhood which is filled with rentals. I’d rather live in a lower middle-class neighborhood with rentals than move to an upper middle-class neighborhood with all the financial stress of a 30-year mortgage loan.
Using it as a forced savings account
The Consumer Reports writer points out that people who put all their money into paying off a mortgage early could be saving and investing. A mortgage is not as “liquid” as a savings account. I find this argument to be foolish because most people I know say they are going to save but don’t. If my husband and I hadn’t paid down our mortgage, we would have likely spent the extra money. We would not have saved anything. When we no longer have a mortgage; then, we will save our money.
Tapping our home equity
Another point raised by the Consumer Reports writer is that borrowing costs will likely be higher if a person decides to borrow against a paid-off home. I don’t think anyone who has the debt-free mentality and diligence to pay off a home would then turn around and tap the home equity. Of course, interest rates will most likely be higher in the future. I refinanced my home mortgage. We now have a 2.75 percent interest rate on a 15-year loan. If we needed money, we’d tap our Roth IRA account. It is possible to save some money while also paying down a mortgage. It’s not an either or situation for most people.
As a person who likes to invest in the stock market, I understand the argument that a person will usually get a better return on investments in the stock market rather than the real estate market. However, that’s only true if the timing is right. During a bear stock market, people can and do lose money. I won’t lose money by owning my home outright, especially if I have proper home owner’s insurance. I can’t put a value on the security of owning my own home outright. I know my husband won’t be angry in a few years when I tell him we have an extra $900 a month to spend or save if we choose.
More from this contributor:
Using my Roth to Pay off House
Recession Over, but Frugal Habits Remain
When the Grandparents Neglect Their Credit Scores