When has paying off a house ever been a decision someone regretted?

I think you would be crazy to not take advantage of a 2.5% mortgage but do you man

Anyone who paid off a <4% mortgage in the past 15 years instead of investing that money likely added years to their retirement date depending on when they wrote that lump sum check.

In your case with a 2.5%, at the VERY least, you should take that cash you’d use to pay off the mortgage, put it in a high yield savings earning ~4%, and have your automatic monthly payment come from that account. Theoretically, your mortgage is paid off if you don’t touch that account AND you are earning a little extra AND able to still deduct interest. Probably the biggest benefit though is in the event of a major emergency, you have a big pile of cash sitting there to utilize and it not be tied up in a home.

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In your case with a 2.5%, at the VERY least, you should take that cash you’d use to pay off the mortgage, put it in a high yield savings earning ~4%, and have your automatic monthly payment come from that account. Theoretically, your mortgage is paid off if you don’t touch that account AND you are earning a little extra AND able to still deduct interest.

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You bring up a great point. I used ChatGPT and it came up with this for me:

Current Mortgage Details (with escrow):
Total monthly payment: $1,300.91

This includes principal + interest + taxes + insurance

From earlier, we calculated that principal + interest alone = ~$770.71

So your escrow (taxes + insurance) = $1,300.91 – $770.71 = $530.20/month

That $530.20 is a fixed cost whether you pay off your mortgage or not — so we’ll exclude it when comparing payoff vs. investing.

Option A: Keep Mortgage, Invest $97,000 at 4% APY
You keep paying the $770.71/month toward your mortgage

You invest $97,000 at 4% APY (compounded monthly) for 12.5 years

At the end of 12.5 years, your investment grows to:
? $159,429

You paid $770.71 × 150 months = $115,606 on the mortgage

Net benefit = $159,429 – $115,606 = $43,823

? You end up ahead by $43,823 vs. paying off the mortgage.

Option B: Pay Off Mortgage Today
You pay $97,000 lump sum now

No more $770.71 monthly mortgage payments

But still pay $530.20/month for taxes and insurance

Your $97,000 doesn’t grow — no investment gains

Net benefit = Avoided interest: ~$18,606, but no investment growth

If I gave the correct information to ChatGPT, seeing it on paper so to speak, Option A appears to be the wiser financial choice, which ultimately can provide me with peace of mind over the years.

Certainly gives me reason to pause and think about this even more.

Of course, these calculations depend on actually being able to find and maintain access to a high-yield savings account offering a 4% return. I haven’t explored options yet, and I’d likely need to monitor rates over time to ensure it remains a better deal than paying off the mortgage.

How would I figure out or estimate my tax liability on interest earned at 4%?

I believe it is taxed at your ordinary income tax rate. I could be wrong, though.

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Frees up monthly cash

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This is the part I just never can understand. Yes, it "frees up" cash...at the cost of putting down a much more massive chunk of cash that you now don't have access too!

Paying off 2.5% money seems really counter-productive to me.

Why does converting your cash nest egg into a much less liquid asset give you "peace of mind"? Legit question.

I semi retired about 7 yrs ago and moved out of the city. Since I didn't have consistent income I paid for my house in cash. But, looking back i wish I had financed at least 50% at a 30 yr 3% mortgage. That's basically free money considering inflation and the tax dedication.

I regret paying off a 5.5% mortgage and missing a decade of higher returns.

If you do choose to pay it early for peace of mind, there is no sense doing half measures. If you find yourself in a predicament, the full payment is still due even if you paid extra early towards principal. At current rates, cash in a HYSA immediately accesible would give me more peace of mind and better return.

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Do you get the deduction if you don’t itemize?

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Yes, up to a 750k mortgage.

I fight this battle with clients regularly and have never won.

Just pay it off once you’ve got to this point in the decision process.