• About
  • Mortgage Basics
  • $40K Challenge
  • Aunt Doris
  • Grandfather Says
  • Privacy
  • Archives
  • 100 Words

Len Penzo dot Com

The offbeat personal finance blog for responsible people.

Should I Pay Off My Mortgage Early?

By Len Penzo

Readers: This is article 18 of 25 from my no-nonsense “Mortgage Basics” quick-reference series.

mortgage basicsThe decision to pay off the mortgage early is always a hotly debated topic. Unfortunately, because everybody’s circumstances are different, there is no right answer. With that in mind, it’s important to consider the arguments for both sides, and then decide the course of action that works best for you.

Reasons to Pay Off the Mortgage

You want peace of mind. Let’s face it: Many people sleep better at night knowing they’re not in debt.

You have a high interest loan. If you’re stuck with a high rate loan, you’re typically better off retiring the loan as early as possible. Remember, those extra payments act as investment with returns at essentially at your loans rate of interest.

Reasons Not to Pay Off the Mortgage

You’re not saving for retirement. Before make any extra mortgage payments, you should always make sure you’re taking advantage of any matching retirement contributions from your employer.

You can get a better return by investing the money. This scenario is usually common for mortgage holders who have low interest rate loans.

You’re getting a big tax break. This is important to consider if you pay a lot of interest. For example, someone in a 28% tax bracket who pays $15,000 in mortgage interest would be entitled to a $4200 tax deduction.

Photo Credit: GotCredit

September 7, 2016

Comments

  1. 1

    Millennial Moola says

    I think most people have bind investments that yield lower rates than their mortgage interest, so most people should pay off the mortgage early really

  2. 2

    Warren Myers says

    Paying $15,000 in interest to get $4200 in deductions (not credit, but deduction) is bad math all around.

  3. 3

    Ms. Montana says

    We paid cash for our home, and I have no regrets. It makes our monthly bills small (under $650 for a family of 7.) We have been able to take a year long sabbatical. We also got a better deal when we bought it because we could pay cash. It might not be right now everyone, but we love it.

    • 4

      Len Penzo says

      Good for you, Ms. Montana! I’m glad the paid off house has brought you peace of mind.

  4. 5

    Amanda says

    Having heard all the arguments and done the math on paying it off early versus sticking to the mortgage schedule and investing extra money, I’ve got to say I will still pay off my mortgage early. Investments aren’t guaranteed, but once a debt is paid, it’s paid. That kind of peace of mind is worth more than any extra returns I could earn.

    Plus, knowing my spending habits, the money is less likely to buy a luxury vacation or new car that I don’t really need if it’s tied up in my house.

  5. 6

    Minimal Millionaire Mom says

    We are paying our home off early, at the end of this month. For us, it was about peace of mind and security. I dont anticipate regretting our decision.

The Question of the Week:

What is the minimum annual income you need to be truly happy?

View Results

Loading ... Loading ...

Recent Posts

  • Black Coffee: Welcome to the Fun House
  • A Georgia Teacher Shows Why It Always Pays to Read the Fine Print
  • Why Extended Warranties Sometimes Do Make Sense
  • 10 Ways to Get the Most from Your Next Business Conference
  • 36 Amazing Uses for Plastic Grocery Bags
  • Black Coffee: A Ponzi for Your Thoughts
  • Grandfather Says: The Continuing Chronicles of Elaine, Part 6
  • What You Must Know Before Filing a Medical Malpractice Lawsuit
  • Million Dollar Neighborhoods Are Still Popping Up Across the US
  • Why Extended Warranties for New Tires Are A Waste of Money

Disclaimer

This site is for informational and entertainment purposes only, and the content herein should not be mistaken for professional financial advice. In fact, making investment decisions based on information published here, or any other website for that matter, is more than unwise; it is folly. This website accepts advertising in the form of monetary and other compensation; as such, topics of discussion are occasionally influenced by these advertisers. Sometimes, an article may also include affiliate links, meaning, at no additional cost to you, this blog earns a commission if you click through and make a purchase (for example, as an Amazon Associate I earn from qualifying purchases). Remember, you and you alone are responsible for the decisions you make in life, so please contact an independent financial professional for advice regarding your unique personal situation.

Sign up for the weekly Len Penzo dot Com newsletter
Len Penzo dot Com Delivered Weekly
Join more than 40,000 readers and fans who enjoy personal finance and macroeconomics with an offbeat twist!
Invalid email address
Thanks for subscribing!

Popular Now:

  1. 1. Scientists Say This Clever Trick Can Help You Break Your Overspending Habit
  2. 2. 4 Online Shopping Mistakes You’re Making and How to Avoid Them
  3. 3. When Is the Right Time to Use Your Wealth Insurance (Gold & Silver)?
  4. 4. Dear Friend: Here Are 41 Reasons Why I’m Not Lending You the Money
  5. 5. Home Repair Scams: Here Are the 9 Biggest
  6. 6. Trying to Save Money on Gas? Here’s Proof That Driving Out of Your Way Rarely Helps
  7. 7. How I Fought My Parking Ticket and Beat City Hall
  8. 8. Are You Frugal or Cheap? Here’s How to Know the Difference
  9. 9. Historical Gold & Silver Benchmarks for Wages and Commodities
  10. 10. 4 Good Reasons Why Some Quarters Are Painted Red

All-Time Most Popular:

  1. 1. 19 Things Your Millionaire Neighbor Won’t Tell You
  2. 2. Dear Friend: Here Are 41 Reasons Why I’m NOT Lending the Money
  3. 3. Why Your Expensive Luxury Car Doesn’t Impress Smart People
  4. 4. If You Can’t Live on $40,000 Annually It’s Your Own Fault
  5. 5. 21 Reasons Why Corner Lots Are for Suckers
  6. 6. 4 Smart Reasons Why College Isn’t for Everyone
  7. 7. 18 Fast Facts About Social Security Numbers
  8. 8. My Ketchup Taste Test: Upset! Guess Which Brand Topped Heinz
  9. 9. Why I Prefer a Spreadsheet to Track Expenses and Manage My Finances
  10. 10. Here’s a Simple Trick for Getting Credit Card Interest Charges Waived

Copyright © 2023 Len Penzo dot Com · All Rights Reserved · Designed by Nuts and Bolts Media

© Len Penzo dot Com 2008–2023