Paying off mortgage

Depending on your current rate, there's probably better rates of return out there. However, the peace of mind to me is worth it. We paid ours off early and there is a sense of freedom that I can't put a price tag on.

If your goal is to get rid of your note for peace of mind, pay it off. If you goal is to maximize your net worth, don't pay it off - invest the extra cash instead.

TLDR, what FinleyStreet said


Here’s the reality,

Some people have the discipline to say “we’ll put an extra $500.00/month towards house since we can automate with monthly bank draft” and then never look back. And that’s great.

But, depending on your age, and other factors - if you took that same dollar amount per month - opened a brokerage account, also setting up auto withdrawal/invest, and just bought shares of VTI, you would have a lot more $ in 10 years, than interest you would’ve saved.

From what I’ve seen though, people have an easier time paying off debt with extra money than they do investing that extra money. Or at least not going in and using that growing principal on some other depreciating asset - like using it to buy a car or boat. They see the money and HAVE to spend some portion of it

It takes discipline - we will only use that brokerage money for real estate acquisitions, should we choose to use it (since we are into RE investing), and not for buying random ‘stuff’.

*If* you ever needed that money you used to pay down, you don’t get it back. Should an emergency arise, that’s larger than your emergency fund in your savings, you have a lot of extra dough in the brokerage account (taxes aside).

I was in the same ‘pay down’ / debt-free boat as you when we first bought our house. But I had thrown some money into a brokerage account, and seeing the power of compounding interest and growth, especially continuing with monthly contributions has turned me into more of a ‘grow my net worth’ mindset.

But as others have said, you can’t beat the freedom of no debt, I would love to be free of my P&I on my mortgage - I just also happen to live in a coastal town where my taxes and insurance are the same amount as my principal and interest. So I wouldn’t actually be saving my entire mortgage payment, just half.

3.2% is a great rate.

A problem I see with prepaying the mortgage vs building more savings is if you do ever hit a cash flow problem (lose of job, medical issue, family illness, etc), your mortgage servicer isn’t going to give you a pass on your monthly payment just because you are ahead of schedule on principal. The monthly payment is due and a missed payment puts the loan into default absent some type of forbearance grant.

Given your rate I would just continue paying the note as schedule and invest the excess. You could always invest the excess in a separate brokerage account and when it gets to be enough to fully repay the mortgage in one lump sum do it then from your “mortgage prepayment brokerage account”

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For those who want the freedom to not worry about maintaining specific income levels and what not, it is a life changing event to be mortgage free. Such a stress reliever.

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I’m sure it is, but having the ability to pay it off and instead watching it grow faster than the debt is pretty sweet too.

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I’m sure it is, but having the ability to pay it off and instead watching it grow faster than the debt is pretty sweet too

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Some people just don’t get it man

Won't repeat what others have posted.

Before I put pen to paper, time is the most precious resource we have. If 2nd job takes away significant time you have with your child, that is a cost I would avoid at all costs (pun inteded). No house early payoff is worth that (to me).

Also, if you have lifestyle bloat in your expenses already, you might consider sifting those out and applying to your mortgage principle. Cutting expenses is 100% risk-free and guaranteed to increase your wealth.

That said...

My approach, (without knowing the financial math facts, your risk appetite, long-term goals, health, etc), in principle:

Invest same $ for same period (investment return > mortgage interest rate)

Take portion to payoff mortgage and the remaining balance available for upgrades to home or support to college-aged child or whatever.


Requires:

Discipline (monthly auto-investing and forgetting)

Valuing the financial opportunity > peace of mind of owning home sooner (those who place higher value on peace of mind would/should disagree w/me; the fact that you wish to payoff before child starts college suggests you might should avoid my advice)


Now, go play with your kid! Good luck.

This. The day I realized that, even after I paid off my mortgage, I’d still owe several hundred for taxes and insurance, I realized the ‘peace of mind’ factor was a myth. I will always owe somebody for my house, whether I have a mortgage or not. I’ll keep my low rate, thank you.

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Stop the retirement savings for now and throw that at the mortgage then when thats paid off start back with the retirement savings

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This is terrible advice.