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From that, there is no surprise that I get a lot of questions about whether or not you should pay off your mortgage early. The standard advice that you will see written up in newspapers or get from your family is that you should own a house and pay down the mortgage. OK maybe not everything that is good for grandpa is good for you but it does sound smart, right?

Pay Off Your Mortgage Early? - The Simple Dollar

How could paying down a mortgage be stupid? No one has ever gotten into dire straights by paying off a mortgage. So its always good advice. Telling someone to remortgage their house and invest all the money on the other hand a smart thing if you are savvy has probably ended in some ruined lives. Something could go wrong if your advice was only conditionally true.


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If this site was about drugs it would be called MyFiveYearBender and the logo would be someone peeing on a wall. Trusted people did research on it and decided that it was very safe advice which caused its popularity to explode. The calculation is simple. That means you make over twice as much money by investing your money than you would lose by paying interest. Pretty impressive. The kicker though! If not paying one mortgage is good , not paying for two is even better! You can use your money for a down payment on another house and double up your mortgages with a rental property.

Mortgage rates are almost always lower than investment returns, so they can function as giant loans for real estate investments. One of the main reasons I really hate paying down my mortgages is that once that money goes into my mortgage it is really hard to get it back out. The only way to get the money back, if you did want it LifeHappens , is to refinance your house which is a pain in the ass. On the other hand, if you have investments on a stock exchange you can sell it today and buy it back tomorrow with relatively small fees.

Easy peasy, and you still have time for your afternoon nap. If you pay off your mortgage you are all-in on your house. If something happens to your neighborhood, your city or real estate-in-general, you are going to get hit hard.


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Then, if you invest like a smart person with ETFs your money will be spread all over the place preventing you from anything sudden and horrible. One magical effect of having a mortgage is that you can often expense the interest you pay against your income, netting you a lower tax bill at the end of the year.

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But I will admit there are a few very specific situations where just dumping money into mortgage prepayments can be pretty awesome. The number one scenario where it is best to pay off your mortgage is if it really motivates you. Sometimes people just get really excited by paying down their mortgage and if you can harness that motivation into saving more money, go for it! Is it weird to fantasize about having no mortgage? If this is you, I would just say to do the really efficient investments another post for later first.

The next scenario where paying down your mortgage is good is if you need some cash flow stability. When you invest your money in the stock market, over the long-term, you average a healthy appreciation of your money, but in the day-to-day your net worth will bounce all over the place. In the short term though, it really is everywhere. For some people even me! For example, I have a bunch of mortgages because I am so into rental housing. I have to make sure my bank account that all the payments get pulled from never dips below a minimum value or my payments will start to bounce.

Bad stuff! The return on investment from paying down mortgage debt becomes less evident. Additionally, by paying off your mortgage early, you lose the mortgage interest tax deduction, which for most households serves to effectively lower the cost of mortgage interest.

Paying off your mortgage can also reduce your liquidity by putting more of your money into an illiquid asset. In some cases, investments are still upside down after 10 years or more. Whether that return on investment from paying down debt is small or large depends on the interest rate and whether the interest is tax-deductible, like in the case of mortgage interest. Paying off the mortgage accomplishes this. If you have enough spare money each month, you also have the option of doing both.

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4 Simple Ways to Pay Off Your Mortgage Early

If you're ready to put in the work and learn, we can show you how you can make the right moves in any market, whether it's going up, down or sideways. Benzinga is a fast-growing, dynamic and innovative financial media outlet that empowers investors with high-quality, unique content. Login Email Password Forgot your password? New to Benzinga? Eric Huffman Contributor, Benzinga September 23,