So why pay off your mortgage early? Well, at the risk of getting googly eyes, I Googled around for a bit and found this excellent comparison of the two srategies. Here's the graphic from that post the summarizes their points.
Their post has an excellent in-depth discussion of each of these points. I highly recommend a visit to read it. Each of the green arrows represents an advantage to paying your home off early and the red arrows represent a disadvantage. It's really a personal thing.
I'm very uncomfortable with gambling, uncertainty and complexity. I want things to be simple and predictable. Paying my home off early makes sense for me because it makes me feel good. In the end, money is not the goal, it's the ends to achieving a goal and it seems to me that peace of mind is a worthy goal. Someday I want to be completely out of debt and have the freedom to live a simple life with very few financial demands. I want to pursue the things I love without regards for how much they will pay. That's why I want to pay off my home early. It works for me.
So perhaps this post was mis-titled. It should read Why I Should Pay Off My House Early. :-)
Update: I have a follow-up post with a very different argument in favor of paying your mortgage off early.
You make a good point. Your personal comfort level is going to drive a lot of these decisions. A lot of it has to do with whether or not you need to tap the equity in your home to retire.
ReplyDeleteWe actually talked about this subject at lunch a few months back. One of my coworkers wants to retire early. His house is mostly paid for, but almost all of his wealth is tied up in the house. So while he could pay it off completely, that would leave him cash poor.
Its true that he wouldn't have mortgage or rent going out each month, but around here, unlike California, that amounts to only about $1000 to $1400 a month. So he was wondering what options exist to tap into its value without risking loosing it.
Since reverse mortgages seem to be a bad deal, we discussed other strategies. One thought was to refinance the remaining 30% he owes on it for another 30 years, thereby lowering his monthly payments to about 35% of their current amount. He still has a tax break and he can instead invest the money he would have otherwise used to pay it off and live off the interest. He figures he'll be long dead before another 30 year loan comes to completion.
Another good reason to pay off your home early is so you can afford more expensive cat food and treats.
ReplyDeleteWhy I did pay off my house early... and a gotcha.
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Great post and thanks. I guess I am in the other camp. We had no mortgage for many years. When we decided to move to a bigger house in a larger neighborhood, we could have had a very small or no mortgage if we had sold investments. We chose to take a reasonably sized mortgage at a very good interest rate. The money that remained invested in the stock market has had it's ups and downs, but has definitely increased in value far more than we have paid in mortgage interest.
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