Pay off our mortgage or not? A glimpse into a couple’s final decision

Hello! Here is a guest post from Melissa Brock about her decision on whether or not to pay off her mortgage. Melissa Brock is a 12-year veteran of college admission, founder of College Money Tips and Money editor at Benzinga. She loves helping families navigate their finances and the college search process. Check out her…

Michelle Schroeder-Gardner

Last Updated: May 27, 2023

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Hello! Here is a guest post from Melissa Brock about her decision on whether or not to pay off her mortgage. Melissa Brock is a 12-year veteran of college admission, founder of College Money Tips and Money editor at Benzinga. She loves helping families navigate their finances and the college search process. Check out her essential timeline and checklist for the college search!

 Enjoy!

My husband and I like to make excellent financial decisions. He says I’m obsessed with our finances — which is kind of true. I mean, I listen to the “Afford Anything” podcast and read every personal finance related piece of content I can get my scroll-happy finger on. I’m also the Money editor at Benzinga for my full-time job. (Okay, okay, he’s right.)

 Our mortgage is a source of well… pain, for me, if you want to know the truth. All the reading I do probably contributes to that. One day, I’ll read an expert post about how so-and-so plans to invest like crazy, pay the minimum on his mortgage, then run, giggling, toward retirement (early!) and revel in the spoils of compound interest.

This person might say, “Why would you pump money into a non-liquid asset?” 

And so my mind goes, “Yeah! That makes sense.”

But then I get this nagging feeling — and I know what it is. It’s the oodles of money we’d save if we paid off our mortgage once and for all. Dozens of other experts tout, “There’s nothing wrong with getting out of debt forever… ever… ever…” (Added echoey reverb for fun.) 

So I reach into my back pocket and pick up my phone to ask my parents’ advice, and that matters to me, too. I know which way they’d vote. I think my dad even made extra trips to the bank when he had any bit of extra money in his pocket — he wanted his mortgage gone. (This was actually smart because interest rates were sky-high in the 1980s.)

After lots and lots of discussions (sometimes I exhaust my husband), I’ll lay out what we decided to do.

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Our story

My husband and I had our 10-year plan mapped out soon after we got married — we’re both firstborn planner-types. (Kind of annoying, if you really think about it.)

We put on paper exactly what we wanted to accomplish over the course of 10 years.

We added “save to build a house” to our list. I really, really wanted a brand-new home because it ensured we could get what we wanted the first time around. I wasn’t interested in knocking down walls to make a decent-sized living room, decimating wood paneling or ripping up old carpet. I didn’t want a fixer-upper — I wanted one that had bedrooms for our two kids and a guest bedroom for family and friends.

I’d bought a tiny split foyer house when I was 24, and I’m glad I did because it helped make our dream a reality. We welcomed a puppy to the Little House on Skenk Street (no, I’m not kidding, that was the name of our street!) and it had begun to feel too small by the time we added our daughter, son and a cat named Hank. We were outgrowing our home. So, the plan was good because we had to do something about our tightening quarters.

Thankfully, we’d put that plan into place and had been saving to build for eight years. We’d amassed a sizable nest egg, too — that was important because building a home is super expensive.

I insisted on real stone (my pick), a decorative wood-burning fireplace (my husband’s real love) — all set on three acres of land.

The bank said, “Sure!” — now, I know that just because a bank is willing to lend you a certain amount, that doesn’t mean it’s the amount you should borrow. In fact, I realize we arguably did the opposite of what every financial professional suggests. The experts crow, “Buy a modest home! Spend no more than 25% of your take-home income on your mortgage payment!” 

I confess, I never did do an actual comparison of what our mortgage amount would be to our income. This was before I’d really solidified my personal investment philosophy. Would I have done some things differently?

Actually, in hindsight… no. I absolutely love this house! And fortunately, we live in the Midwest, which works in our favor. Had we lived in California or New York on our current salaries, we’d never have been able to afford it.

I wasn’t making much money at the time as an admission counselor at my alma mater. I talked to families daily about financial aid and paying for college, so when our mortgage amount doubled, I started freelancing. Writing is my first love, anyway, and I was able to side hustle my way toward some great opportunities. In a way, I’m so grateful for this Craftsman-style behemoth for helping me pursue some other avenues. 

Anyway, the bank said, ”Yes!” and the builder built it and there we were, left with a new house in a muddy pit (do you even understand how long it takes for grass to grow?!?) and a new mortgage payment. We moved in on an icy day in December (I slipped going up the ramp to the moving trailer) and we kept on going with our lives. 

The only real difference was the admiring look back we’d give our new house as we drove down the lane on our slightly longer commute to work. The best part of building it was that it gave us tons more room to move around.

 

Weighing the pros and cons of paying off our mortgage

At first, neither of us really spoke a word about the mortgage.

It was just there, whisking money from our bank accounts on the fifth day of every month. Whoosh! Gone. We went about our lives with no new 10-year plan. We’d pretty much gotten to the end of the 10-year plan after we’d accomplished what was in the original 10-year plan. 

I definitely believe we were in a lull — a “What’s next in our lives?” lull. Then, suddenly, one day, I went on a question-seeking rampage.

“Where are we going in life? What do we want out of life? OHMYGOSH, where should we retire?” AND — “WHAT SHOULD WE DO ABOUT THE MORTGAGE?”

My poor husband.

He’s probably in a constant bewildered state. I frantically researched every expert’s advice. (They all provided conflicting advice.) I asked everyone I knew. (They all provided conflicting advice.) 

I waffled back and forth on this for months — and for a short stint, I was absolutely convinced that for peace of mind, we should chuck everything we had at the mortgage. Then I changed my mind. Short of checking myself into therapy over this, we decided to weigh the pros and cons. 

 

Pros to paying off the mortgage

Here’s our official list of pros in favor of committing all our extra money toward paying off the mortgage:

  • We’d free up cash flow that would otherwise be used to make a mortgage payment each month.
  • We’d be debt free. For life. From all debts. Forever. (Man, oh, man, there’s nothing wrong with being debt free.)
  • It feels good. We’d achieve peace if we paid off the mortgage ahead of time, especially before retirement.
  • We’d have the mortgage paid off before our kids headed off to college — so we could dole out money for that, right?
  • The interest we’d save! Oh, my land! The zeroes never seemed to end. We would save thousands upon thousands of dollars in interest if we worked diligently to pay it off.  

Related: Is Paying Off Your Debt Worth It?

 

Cons to paying off the mortgage

Next, we made a list of cons that would help us determine whether committing a full-on assault toward the mortgage would be a bad idea:

  • Lots of cash would be tied up in the house — a non-liquid asset.
  • Our interest rate is low — and the annualized return for the S&P 500 is roughly 10% over the last 90 years. We’d be missing out on higher returns if all of our efforts were put into paying off the house.
  • We’d no longer be eligible for a mortgage interest tax deduction.
  • We’re never planning to sell, but we realized that if the slim chance ever existed, it might be harder for us to sell quickly if we needed to get a very specific amount out of the home. 

So, that was our list. I’m positive that there are more pros and cons that could be added to it, but those were the overarching themes that stood out to us and our personal situation.

 

Talking with the pros 

My husband and I have largely been proactive about making our own decisions regarding money. That said, from time to time, we’ve reached out to a financial advisor for sparks of advice. I also got in contact with Vanguard about this very issue just to get another perspective on what an advisor from a huge firm would suggest.

Both professionals’ advice was the same: “Invest in the market!

It probably reverberated for my husband right then and there. He was all for investing, saving for college for our kids and building up our liquid assets.

I was the roadblock.

I was still waffling because of some deep-seated need to be debt-free for life. (Probably due to the Recession and aftermath of COVID-19 and the possible “What-ifs.” What if one of us lost a job? What if both of us lost our jobs? We’d still have to pay the mortgage. There’s a reason a lot of individuals stated, post-Recession, that debt is still debt, whether it’s good debt or bad debt. 

So, again, I was waffling. At one point, I even said, “Okay, let’s just invest.” And then I took back my words a week later. (I’m terribly indecisive.) 

At this point, my husband was starting to feel a teensy bit frustrated. I knew I needed to stamp my foot in the ground and stand by a decision. 

 

Our final decision 

So what did we decide to do? Well, we actually opted for a hybrid approach. We decided to invest and pay an added amount each month — with the promise that we’d build up liquidity to pay off the mortgage in the future.  

  1. We increased our mortgage payment amount and put it toward our principal. Now, this is key. Directing it toward the principal is the only way to see it decrease faster. We rounded our payment up to the nearest thousand. We are not dedicating all of our excess money toward the mortgage. The penny pincher in me doesn’t like the idea of losing so much through interest, so that’s why some extra will be allocated toward the principal.
  2. We invested in the stock market. We wanted to make sure our money wasn’t locked up. We have kids who need to go to college someday and retirement to save for. There are a lot of buckets and we knew we’d need to allocate as much as possible to every bucket.
  3. We have a plan for payoff — down the road. We’ll keep peeking at our liquid assets and determine when the time will be right to start paying off the mortgage in chunks (or in one fell swoop, which would be totally exciting!) 
  4. In addition, we refinanced our mortgage to a rock-bottom rate. We took on a lower interest rate and shorter term. As soon as COVID-19 hit and interest rates tanked, I sprung into action and got on the phone with a lender.  

 

Tips for deciding whether to pay off your own mortgage 

I’m sharing my story because I hope I can save you from agonizing over your own mortgage. Here’s a conglomeration of things I learned along the way.

 

Tip #1: Consider your needs and wants. And your future needs and wants.

What’s your comfort level? Are you a person who needs to know that debts are paid off so when disaster hits, you’re in a good situation? Are you absolutely sure your job is stable? The thing is, we don’t know what’s going to happen (COVID-19 taught us that). Maybe you have life insurance, so if the worst does happen, you leave money for your family to pay off the mortgage. (That’s certainly something we took into consideration.)

On the other hand, you might take a look at the numbers and run straight for the stock market because you know you’re going to make more if you invest. Putting blinders on and sticking to the numbers is definitely one approach. Remember, there’s really no right or wrong answer. You are not your friends, your next-door neighbors, your sister, your parents — or to whomever you may be comparing yourself and your situation. 

The point is, on some level, it’s a personal decision. Consider your own priorities.

 

Tip #2: Do the math.

Do you remember hearing the words “amortization schedule” when you closed on your home?

If not, that’s okay.

It’s a giant table that lists all the mortgage payments you’ll make over time and how each payment is applied toward both the principal balance and interest of your mortgage. Your bank probably has an amortization calculator that will help you understand what will happen if you “up” your payment, refinance or pay a giant lump sum toward your principal.

Also, some banks charge fees for paying off your loan early. Check into whether your bank will charge you extra. Many banks no longer do this but check to be sure that your bank doesn’t. The last thing you’d want is to be penalized for doing a good thing for yourself!

 

Tip #3: Make a decision. That doesn’t mean you can’t reevaluate later. 

Sure, you can just pay the minimum on your mortgage for 15, 20 or 30 years — whatever your mortgage term is. But if this doesn’t sit well with you, do something about it. Take matters into your own hands. 

Spend some time considering how you’d ultimately like to end your mortgage. Again, you can keep it for the full 30 years. Or you might have a 15-year mortgage and decide you want to pay it off in 8 years!

You as a couple, or you alone, are in charge of your financial future. Your financial advisor isn’t going to make the final call. Your friends, your family aren’t going to make those decisions for you, either.

Be the captain of your own ship! 

This is not to say that your goals won’t change later. You might make a different decision 10 years into your mortgage. Your financial situation could completely change. For example, maybe you don’t have extra money to chuck at your 30-year term mortgage when you first buy or build your home, but then you get a better job later. You may switch gears and decide to focus on paying off your mortgage!

 

Final wrap-up: Do what’s best for you — confidently!

Are there days when I second-guess our decision?

Of course. (Remember, I’m incredibly indecisive.)

The reason I probably agonized for months (I know, too long!) is that we only have one life to live. The choices we make now dictate how we live down the road. I try to think about our decisions very intentionally so our future selves are satisfied. It’s a major thing for me. 

Thoreau said, “Go confidently in the direction of your dreams. Live the life you have imagined.” And that’s really what it’s all about, right?

Do you want to pay off your mortgage early?


Michelle Schroeder-Gardner

Author: Michelle Schroeder-Gardner

Hey! I’m Michelle Schroeder-Gardner and I am the founder of Making Sense of Cents. I’m passionate about all things personal finance, side hustles, making extra money, and online businesses. I have been featured in major publications such as Forbes, CNBC, Time, and Business Insider. Learn more here.

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  1. Marleigh

    Definitely paying it off early. But we are investing too. We feel we have the best of both worlds. The house is so cheap, it doesn’t make sense to keep a note on it. We just want to be done and if all goes well, I’ll be 45 when it’s paid off in 3 years. I love the idea of being mortgage free for the rest of my life while I’m still young and active .

    1. Marleigh,

      YES! That’s how I felt, too! 45 is absolutely perfect and I’m proud of you. ๐Ÿ™‚

      All the best to you and hurray for financial freedom! ๐Ÿ™‚

      Melissa

  2. Debbie Gartner

    Melissa – This is very timely as I’ve been thinking through the same thing for the last 10 days…except mortgage vs investing in 401K (as I got off track on that one). 11 days ago, I just got out of $238,000 of bad debt (took 3.5 years). I have good debt left (my mortgage) which will naturally get paid down over 16 years and has tax deductions. 401K has same deductions and the 2 are kind of wash give interest rate vs. growth rate. I also ended up w/ a blended hybrid. Funny. (oh and some money for me, too and to fix up my place).

    1. Debbie, I’m so happy to hear this! You are being so smart with your money. Bravo for you. Thanks for reading this post! As you can see, I get super stressed out about big money decisions. ๐Ÿ™‚

      Melissa

  3. […] Would you pay down your mortgage if you could with these insanely low rates? One couple at Making Sense of Cents considers the pros and cons and ultimately makes the choice that feels right for them. Pay off our mortgage or not? A glimpse into a coupleโ€™s final decision. […]

  4. Sam

    I tend to change with the tide. When the interest rates were high I was putting majority of my money towards my mortgage n a little bit as emergency money on high interest. While interest rates are low I put majority into the share market’s but still putting little bits into emergency acc.

    1. Sam,

      EXACTLY how I feel! ๐Ÿ™‚ It can be really hard to make these decisions but I really, really hate the idea of having a 30-year mortgage. Way to focus on that emergency fund. ๐Ÿ™‚

      Melissa

  5. Sadly savings rates are so low nowadays it makes more sense to invest or try to pay off the mortgage – but as you say, only if it is applied against the principal and actually reduces interest, not all mortgages allow that.

    We were more risk averse so paid extra on the mortgage for a few years and cut it about 30%. When my wife had to give up work we moved to a more rural area where we could buy a similar (but much cheaper) house with no mortgage. Wonderful feeling!

    I’m glad we decided not to go the investment route instead. You mentioned 10% average return over the last 90 years but in more recent times (2008+ crash and current Covid crisis) it’s way less than that, whereas reducing debt is solid.

    I agree the important thing is to actively plan to do ‘something’ or it’s so easy to just blow spare cash on useless stuff with nothing to show for it – been there, done that…

    1. Roy,

      I 100% agree with you. And your own risk tolerance is really important to consider. Everyone’s comfort level is completely different.

      DEBT is still a four-letter word. ๐Ÿ™‚

      Thanks for reading, Roy!

      ๐Ÿ™‚ Melissa

  6. I think paying off the mortgage as fast as possible will be an excellent look towards keeping one’s credit score near to or on the mark @ 850. You just never know when you need a million dollar line of credit for other ventures, such as starting a business or a million dollar side hustle that requires you to purchase more properties.

    1. DNN,

      You’ve GOT to keep that credit score in tip-top shape. Exactly. A million-dollar side hustle?! ๐Ÿ™‚ Love it!

      Melissa

  7. Paul

    Nice article Melissa. Looking at my own situation, my after tax mortgage rate is in the low 2% range. Any cash that I have with long term expectations goes to my investment account. The goal (can never say guarantee…) is for that money to make more than my mortgage rate. I will say that putting some money towards principal reductions is never a bad idea!

    1. Paul,

      It’s a big puzzle, isn’t it? EVERYONE’S situation is different. I’ve always needed to learn, over and over, not to get into the comparison trap because we all have different needs.

      I always love to put extra money toward principal, that’s why I have so much trouble figuring it all out when interest rates are so low. ๐Ÿ™‚

      Thanks!
      Melissa

  8. James Kennedy

    If you are one of those fortunate few that can reliably create an investment return greater than your mortgage, NOT paying off your mortgage is almost a no-brained. For example, If your interest rate, say, is 2.75% and the return on your investments is ,say, 10%, even after paying tax on your investment profits you will be able to pay off your mortgage WAY sooner than if you paid your mortgage off early.

    I say itโ€™s โ€œalmostโ€œ a no brainer because we have to allow something for the added peace of mind we will get from watching the mortgage go away or at least decline quicker. If (no matter how irrational), the pleasure of being free and clear outweighs the satisfaction of borrowing the bankโ€™s money at 2.75% and making a 10% return on it (which is in essence what one does by not paying pay off the bank early and invest the money instead), then Insuppose one has to go with their gut.

    Thatโ€™s why I liked the hybrid chosen by the author to this article, She went for the interest ment proofits but still go the satisfaction of paying the loan off a โ€œtitle early by making small payments of additional principal. The only thing better (if her loan permitted it) would be to switch to weekly or biweekly loan payments, which will advance the payoff date even further.

    1. James,

      The keyword is “almost,” right! There’s more to it sometimes and you hit the nail on the head โ€” it’s peace of mind.

      Thanks for reading!
      Melissa

  9. Jim Homan

    Please let me know a little bit more about how it is more cost effective to invest instead of paying off your mortgage and saving thousands and thousands of dollars in interest. Isn’t paying off your mortgage like earning that interest money back.

  10. Richard

    What a great article! I love that you emphasize re-evaluating your decisions and making financial changes when necessary. I personally think that most people have the notion that they have to go all in one way or another.

    Your hybrid mortgage paydown/investing approach seems like a fantastic way to pay down debt and still earn interest on investments. Was that a compromise between you and your husband?

    We are building up a real estate portfolio and plan on leveraging to help us scale. At some point, we might shift and begin to pay down our mortgages more rapidly.

    I’ve heard many investors say, “Do whatever makes you sleep well at night”. I think everyone should use this advice when making large financial decisions.

    Thanks for the awesome content!