It just mentally frames house as a business debt rather than a personal debt. But I hate it when people in the finance community advocate being debt free because of the emotional feel of it. I’m not saying you paying off your mortgage early is the wrong decision. Our question is what … There is more to it than end wealth. I was no longer uptight or worried about losing my job or a demotion. Great post Rob – Even though we just chatted about this on our podcast episode, I’m still inspired how you are free to do what you want with your time and money now. Thanks for the read!!! Mustard Seed is right. On the other hand the last 8 years of a raging bull and the extra money I had riding that bull has put my net worth in a very comfortable spot. I totally agree with you. The tax situation is tricky as you could go multiple ways. If I ever had to pay the mortgage, I’d just get some money out of the 6% account, the point being I had the money so I had the security, plus I had another 3% growth beyond the security. I eventually sold off many after they more than doubled in price & then used the cash to accumulate higher paying REI. Contact: Jonathan Brozek (NMLS #850168) at 916-788-7982 or Jonathan.Brozek@usbank.com, CT, MA, NH, RI I thought I knew everything there was to know about finance. Being mortgage free gave us a big psychological boost. We are six years into a 15 year mortgage at 2.875%. If I had purchased the S&P 500, back when I bought my house (June 2004) and held it until I paid off my mortgage (December 2012), the total return from the S&P 500 would have been 46.04% with dividends (Source: DQYDJ). Sometimes peace of mind trumps dollars and cents . That’s awesome that if you wanted to pay off your mortgage now that you could with one swipe of a check I definitely don’t regret it but I do wonder from time to time how much further ahead I’d be…. I am not in any rush to pay it off at this time. You are absolutely right. Contact: Moses Luevano (NMLS #1426259) at (855)4BankMD (422-6563) or mdl@bankmd.com, AZ, FL, IL, IN, KS, MN, MO, WI Decisions, decisions. But the fact that it’s forced savings. I guess the follow up question is, “Does that even matter, or is it only semantics?”, I’ll defer to PoF but since I know what the rate of return was for my mortgage calculated with the interest rate I would think it was positive based on the final rate of return. Given your numbers, to pay off your loan in 13.5 years (average of 12 – 15 years), your monthly payments are about $6,025. Some financial products mentioned on this site are from companies that are partners with APRfinder. No matter what, there is a risk with the stock market. I will work 3 days and rest of the days pursue things I enjoy like being a trainer or work couple hours at the gym. I also had the same experience at my job. Retrospectively not paying off the mortgage has been an amazing decision for our financial well being. It makes more sense if you read the linked post and my explanation there, I promise. Designed with convenience and timeliness in mind, 70% of surveys are answered on a mobile device in just a few minutes. I know for some people they can handle it very well while others like myself have a bit more difficulty dealing with it. (Another partner advised me that $4M was needed to retire, and I made this another goal.). Great blog! You can’t go wrong paying off debt. I’ll let Rob explain, after a brief introduction, which he kindly supplied. Very true Joe!!! You pay a lower interest rate and get to sock away more into your forced savings account (principle) from the get go Plus I’ve found that most people I know aren’t disciplined enough to save the difference and end up spending it . While the interest on a 30-year mortgage is substantial, most consumers cannot afford to make extra payments or use available cash to pay off such a large balance all at once. I would keep either a basement or attic room for myself in each home. I’m glad you enjoyed the story and yeah it’s crazy the amount of money they lent me back in the day. Thanks. Other small sacrifices can go a long way to help pay off your mortgage early. It requires a review of big-picture financial goals, financial capabilities, and mortgage details like the interest rate and loan type to determine which strategy makes the most financial sense. That’s nowhere near what you could make if you invested in the S&P 500 or a similar index fund long-term. Pros of paying off your mortgage early. We are also an MD/JD couple, not too many of those around here. In my opinion, this is one of the biggest benefits of being financially independent. Earn honoraria. Many financial advisors promote investing money in the stock market instead of paying off your mortgage. Incremental increases towards your mortgage is a great way to pay things off. Therefore, given the difference between the two figures, I theoretically would have had double the return if I had invested in the stock market (5.8% vs. 2.9%). Automate Your Finances | Sustainable Medicine, FOMO, Cancer, and the Practice of Medicine - Physician on FIRE, Getting Rich With A Mortgage - 1500 Days to Freedom, How To Shop For A Home Mortgage | Mortgages 101, Paying off Your Mortgage Early: 10 Things to Consider - Bella Wanana. I paid off my mortgage somewhere between 2002-2006. Many people choose to pay off their mortgage early by making extra mortgage payments. So I locked in a guaranteed rate of return of 3.5% right? I just paid off my mortgage for a home a bought in 2009. at age 22. I was hoping to show in the comparison what the difference of the extra payments that I made towards my mortgage. I took out what seemed to be a huge, but reasonable, mortgage. Here are give ways to cut your monthly payments and pay … Whether it is a good option for you really depends. Had I needed to sell the property in 2010, I would have done terribly. Plus I had 13 years of the tax write off. I finally had some excess cash at the end of every month that I could freely choose how to spend. So it’ll be nice to have a little diversification during this time . Having a mortgage payment in retirement would significantly increase the size of nest egg to draw from, and consequently, delay that start of early retirement. Assuming you’ve had your existing mortgage for a while, there’s a good chance your current interest rate is significantly higher than today’s market rates. I had a few friends who dove right into homeownership after college only to be faced with a tough decision of whether to take a job offer elsewhere which involves selling and relocating or staying put. Pay off mortgage early – the right choice for you? I was officially free to make life decisions without worrying about how to account for ~$1000/month. I love hearing views that opposite side of the coin I wish I had the risk tolerance for debt. Some of these lenders also offer loans for other high income professionals such as dentists, veterinarians, attorneys, podiatrists, optometrists, accountants, and others. I didn’t want this debt to limit me in the future. Nice to be with great company. Great post! The interest after tax benefits bis close to 0 and we have in the emergency fund and bond like investment the cash to cover all future mortgage payments. For homeowners who have higher than market interest rates on their mortgage, a refinance may offer a lower cost of borrowing over time. [PoF: If I was still carrying a mortgage, I’d probably celebrate the arbitrage of carrying tax-advantaged low-interest debt while investing in index funds with a higher projected return. I think paying off a mortgage is great, especially for early retirees as it is a form of deleveraging. Today, we have a guest post from a co-nominee for the Best New Personal Finance Blog at FinCon last year. We paid it off. $1,214 ÷ 4 = $303.50 If you want to pay off your mortgage early, choose either accelerated bi-weekly or accelerated weekly. Both of which emphasize sound financial education and advice. *See sponsor sites for conditions, terms, rates, fees. With a rate of 2.5 %, 10 years left (15 year mortgage) and FI the ability to be debt free is appealing. I was definitely glad to diversify when I did . My investments do better than index funds do. I have about £150K in cash savings and zero debts now and this has allowed me to quit working under the unbearable pressures of the NHS whilst giving me the option of working as and when I choose as just getting more savings is not a prime motivator. Though I guess, it depends on each person’s risk tolerance. Contact Sandi Jameson-Frith (NMLS#564023) at 586-749-8355 or sandi.frith@huntington.com, MI, FL I am trying to aggressively pay down principal on our mortgage. For retirees, paying off … Get hot tips, exclusive deals and the latest news sent directly to you. I love finance because of the psychological element. Paying off a mortgage balance early, either through additional payments throughout the years or as a lump sum after some of the balance is paid off, results in an interest saving for most homeowners. I’ll definitely have to check it out. They too paid off their mortgage and like you described the psychological boost from not having to worry about the mortgage. Especially if income is increasing annually. I have a $770,000 mortgage at 3.625%. I discuss my experience using a doctor mortgage in this post. Thanks for the kind words!!! Interesting story! Therefore, I took more chances at work, which involved taking riskier positions in order to move up. That it was a bigger predictor of your success. Looking back, I would have liked to have saved more but I really do not have any regrets. As an introvert, I felt both terrified and excited. I practically live off of $10,000 a year I make $30,000 after taxes a year and my partner works as well. Keep in mind, this was the early 2000s. Thanks to my early planning, I was grateful to be in a position to pay off my mortgage with about five months of concerted effort at the end. Join now & receive a $10 bonus!. Considerations for payoff arise for a variety of reasons, but they often revolve around the feasibility of eliminating the balance or the need to do so based on other financial goals. There are obvious pros to paying off mortgage loans early. The interest payed over that time is $204,511 Get top-notch CME and peer-reviewed content. Sounds like you have a plan in place and are executing it perfectly That’s awesome to hear. Lower interest rate, more money going towards principal from the get-go. I agree with this wholeheartedly. We’re slaying our mortgage now, baby. If you pay it off in 6 years (average of 5 – 7 years) that’s $12,000 per month with a total interest payment of $87,229. You can also subscribe without commenting. Here’s one way to look at my situation. But that would mean my wife and I would have to be ultra frugal and make only small contributions to our investment accounts; it would be like living our residency and law school days all over again in which we felt like we were barely scrapping by. That is already higher than any of my debt. Get exclusive deals and the latest news sent directly to you. It definitely wasn’t easy but I am incredibly thankful that it’s paid down now. But this strategy allowed me to come & go at will & be there to collect rents each week & there was always beer in the fridge. Back in the ’80’s I would buy run down homes for rehabbing. As long as you have a mortgage you still are required to make payments on it. Shortly after I graduated from college, I felt ready to buy a house. Contact: Doug Crouse (NMLS #363861) at 816-728-3631 or Doug.Crouse@umb.com. Love my home it was built in 2005 so its still new . No car payments. I paid cash. Before cutting a check for a mortgage loan balance, be sure to evaluate these factors to ensure you’re making the right decision for your circumstances. Personal finance is personal for a reason. Both are correct. If you’re trying to pay off your mortgage early, the worst thing you can do is give the bank extra Photo by Avi Waxman on Unsplash If you own a home, you’ve probably been sold on the … It’s given me enough to consider just writing a check for the rest of the mortgage, which I might do at some point. Given your numbers and to pay off your loan in 13.5 years (average of 12 – 15 years), you monthly payment are about $6025. Neither of us won the Plutus Award, but the nomination alone was an honor. The interest payed over that time is $204,511 That is my GOAL.Eg Consider an average mortgage with a 4% interest rate, fixed for a 30-year period. I thought that was interesting . I paid off our house in 2010, and while it would have been mathematically more advantageous to pad the nest egg with the house overpayments, math does not keep me up at night, but debt does/did. We lived there a few more years, then when we moved to Michigan, we sold the house and paid cash for our new one. The three main features you will see with most physician loans are: Are you interested in a physician mortgage loan? From time to time I wonder how much further I would be along if I hadn’t but then I think about all the risk I’ve taken at work and why it was the right move for me . I have an amount equal to my mortgage payoff in a high savings savings earning 1.60%. We also don’t have kids and run Airbnb so that helps. Once it’s paid off I’ll put more into my taxable accounts and/or start making backdoor Roth contributions (which will be easy for my wife but difficult for me due to other IRA accounts). Thanks for sharing Gasem!!! Pay off your mortgage early by adding extra to your monthly payments. Free mortgage payoff calculator to evaluate options and schedules to pay off a mortgage earlier, such as extra monthly payments, a one-time extra payment, a bi-weekly payment, or simply paying back the mortgage altogether. I’m right there with you rob, while I know mathematically it might not be the right move, paying off our mortgage is pare of our FIRE plan. More importantly, no longer having debt allowed me to relax at work. Over the last few years having enough cash in investment accounts has allowed me to take on more risk at work which has payed of handsomely and allowed even more taxable account contributions. If money came in, it usually went to paying down the mortgage. We celebrated when our investments were equal to our debt and had saved up 20% for a home down payment. Now that I am FIRE aware and understand my numbers I want to keep the mortgage. Pay off your mortgage early with these personal finance tips. If you get sometime please give it a read. Find the latest medical articles and paid surveys. Living in a HCOL area I see people struggling to save and pay for their immediate expenses. The rest of my life has been renting or owning homes outright. I’m in the camp of you need to enjoy the financial journey along the way, within reason Sounds like you have a great plan in place!!! It was nice to be debt free during the great recession. , We’re expecting a snowstorm this weekend and those Hawaii pictures are making me wish I was anywhere but here right now . Great article. That will occur when we are financially independent and do not need the debt any more. Maybe 529 money might be an option. That said, I completely get the behavioral finance side of this and living debt free. You could also put the money you’re saving while staying at home to knock out extra principal. Its annoyingly bald face hypocrisy to tell someone “ignore all emotions, dont sell at the bottom, but think of the feeling you get by paying off your mortgage”! With good but highly unstable income and health reasons to consider, it was never a question of lost opportunity costs. Today we hold a large portfolio of free & clear properties that allowed me to retire at 49. I’m currently in that situation as I face the same dilemma. We are just skipping our after tax savings for now though we already have a decent 150kish in there earning some dividends…. I also factor in the peace of mind of never having to worry about a mortgage payment again. For me the psychological benefits are worth it. – Wealth Newsletter Daily, Things to Consider Before Buying a House - The Female Professional. We are just starting to throw a little bit extra at the mortgage. Holly Johnson and her husband paid off about $100,000 in mortgage debt in less than two years, on a mortgage balance with a 3.75% annual percentage rate. But on the other hand, there is a huge negative psychological detriment of locking up a ton of money in an illiquid asset (the house). Today we still have 10 years on our mortgage and 16 years on our school loans. The analysis here involves a “feeling of security” by being debt free, but I always felt secure. Thanks for sharing!!! Fun post! To go more negative with a negative bond would be to sell more bonds (take out bigger mortgage). While the interest on a 30-year mortgage is substantial, most consumers cannot afford to make extra payments or use available cash to pay off such a large balance all at once. I’m a little jealous of people who have achieved this monumental goal. I agree that personal financial decisions are not always entirely math driven. Here are three solid strategies to pay off your mortgage early. Instead, you almost certainly made a clear plan, committed to it, and stuck to it over time. So my household income is about $80,000 a year and just using $10,000 from that. I know the advantages of leveraging debt on paper but for whatever reason have a difficult getting my mind to wrap around it . I realize that I could be further ahead but the peace of mind is worth it . Contact: Marc Evans (NMLS #362579) at 920-831-7721 or Marc.Evans@bmo.com, AR, CO, KS, MO, OK, TX You can pay off your mortgage faster and save on interest, even if you don’t eliminate the entire balance at once. That’s awesome to hear and I definitely wish I had a bit more a debt tolerance. Payoff Your Mortgage Early My credit was bad when young, so the only place I could afford was very low cost and a crappy house in crappy area. I don’t think we are in a hurry to pay it off but the goal of reaching retirement with no consumer debt is huge. That was my line of thinking for years. This is why I am still an avid proponent for paying off your mortgage early. I know for me it was the right move from a psychological standpoint whereas for others I know it would have been the wrong move. Should you pay off your mortgage early? For us, between 4 to 6 years to paying off the mortgage AND saving enough for life after no 9-5 job. Notify me of followup comments via e-mail. I’m with PoF on the 15 year loan. Haha. The benefit is only apparent when the mortgage payment disappears. Great story, Rob. Not quite. Love f – fund ideal, does make a nice difference at work, and maxing the 403 funds etc is likely a good idea, however how much fin aid for ( I am assuming your kids ) a physician kid is really going to receive is likely to be low. I was lucky that all of my family lives in the area and I really didn’t have any desire to move anywhere else. What seemed to be aggressive, I had graduated with a 30 year went. 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