OneBite® - Eating the Financial Elephant

Should you pay off your mortgage early?

Jun 29, 2022

By: Shawn Meade

Tags: Life, Family

When it comes to finances, people often have a running inner dialogue.

“What is bitcoin?” “How do I pay less taxes?” and “How do I retire early?” “Will my family be taken care of if I die?”

But overall, the top question is, “Should I pay off my mortgage early?”

There is no easy answer because the decision depends on many variables:

  • Your current mortgage rate
  • Whether you can deduct your mortgage interest as an itemized expense
  • How much longer you have to pay on your mortgage
  • When you plan to retire
  • Your risk tolerance
  • How much money you’ll have going into your retirement
  • Whether you like known outcomes or prefer to gamble a little

Numbers vs. emotions

Keeping a low-interest-rate mortgage makes more sense than paying the loan off early with a lump sum of cash because you can invest the cash to earn a higher rate of return in the markets long-term (as opposed to saving some interest expense each year going forward).

For example, if you can get 6% to 9% in the markets over a long period, why would you pay off a 3¼% mortgage that might be tax deductible?

The biggest reason is the lack of a guarantee. It’s hard to throw “guaranteed” around in the investing world. Only a few investment products can put that word anywhere — for example, FDIC-insured products such as CDs, certain life insurance offerings and U.S. Treasury bonds.

Paying off your mortgage generates that guaranteed rate of return.

A quantitative and qualitative decision

So, how do you stop mulling over the choices and decide what’s best for you? Here is a good starting point.

You should probably pay off your mortgage if you:

  • Like guaranteed stuff
  • Don’t want to owe anyone anything
  • Don’t want to stay on top of making payments
  • Don’t want to worry about a mortgage payment if you ever get laid off or become disabled

You should probably keep your mortgage loan (and invest the cash you would use to pay it off) if you:

  • Have the stomach for stock-market volatility
  • Have the ability to budget for your mortgage payment
  • Have a low mortgage rate
  • Like to maximize your growth potential

In many cases, the answer is clearer after doing this analysis.

How we can help

Which option would bring you inner peace when it comes to paying off a mortgage early? If you still aren’t sure, we’re here to help you decide — and achieve — whatever will bring you peace of mind.

Learn more on our private client services web page.


Shawn Meade, CFP®, CPA, MS
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