Should You Pay Off Your House Early?

I paid off my house long before the 30 year mortgage was due. In fact, because of some blind luck in my housing market, I was able to sell a house I bought right out of college and only take out a small loan to buy a larger house when I got married. I was then able to pay that house off in about five years.

I know, every financial advisor will tell you if you have an interest rate lower than what you can make in the market, you should keep making payments. My concern with this advice is that they make more money by you not paying off your house.  If they are not asking questions about your individual needs and reasons behind trying to get out of your mortgage, then you should look for advice elsewhere. I have three points on why it was the right move for me. Two of these points are financial and and one is simply psychological.

1. That low interest rate you might have is only realized if you keep your mortgage for the full thirty years.  I am sure you looked at your first mortgage payment and saw that you were paying almost all of your hard-earned money to interest and very little to principle. If you sell your house after ten years, your actual interest rate was much higher because your interests payments are heavily weighted at the beginning of the term.  Now you may be saying, "But, I am just going to buy another house, so I will not be losing anything." Well, you will be starting over with a new mortgage, and you have no idea what the rate will be when you go to roll over your current principle into a new house.

2.  I am not going to run the numbers, this is simply anecdotal, but, in the long run I came out better financially. If you are looking to pay off a mortgage, one of two things probably happened.  You either lucked into some money (lottery, lawsuit, inheritance) and in that case, you might not be solid with money and paying off a mortgage could be a great way to keep you from making poor moves with your new found wealth.  More likely, you are good with money and have saved up over the years.  If this is the case, just because you pay off your house doesn't mean you are going to stop being smart with your extra money you now have from not making payments.   Within in a few years, I had already put more in savings and investments than I had before making the large payment.  I am sure if I continue over the decades saving what I was spending on house payments, I will come out pretty well.

(No one really knows what the market, or crypto, is going to do in the short run. I happened to pay off my house when the market was pretty flat, so the money I used to pay off the house would have been even or lost money the for the first year after the payoff.  Once again, luck on my part, the market could have gone up 30 percent that year and I would have been out quite a bit of money.  This, though, is short run thinking, and I was looking at the long term benefits.)

3. This is the one that isn't about which decision is going to make you the most money, this is about enjoying yourself.  If you remove the cost of shelter in your life, the rest of your life becomes a lot less stressful.  Your job, if it is not your dream job, now can be replaced a lot easier. In my case, I was able to walk away from job that had me traveling 40 weeks out of the year.  I didn't quit working completely, I simply live my life on my own terms now and work when I want.  I wake up with my kids every morning, get them on the bus and I am waiting for them when they get home. 

It all depends on what your goals are. Maybe your goal is to be a day-trader or start your own business and that money you saved is better spent on those dreams. Just don't take the traditional advice from people who make their living off fees from your savings.

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I am an American aquarium drinker. I assassin down the avenue. I'm hiding out in the big city blinking. What was I thinking when I let go of you?

Interesting Thoughts, That Aren't Always Mine
Interesting Thoughts, That Aren't Always Mine

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