Today I’m going to talk about why I believe paying off your home mortgage early makes more sense for us middle folks (and probably the upper folks too) instead of investing all of your extra money into the stock market.
From some financial advisors, we hear advise such as paying off your mortgage is a bad financial decision if not down right stupid.
But unless you are a robot, I don’t believe this is true!
Let’s looks at the argument for not paying off your house early. The typical argument goes that if you take the extra amount that you would pay on your house and invest it, you’ll end up rich some day!
The problem with that argument for the majority of us is twofold:
- That extra money that you were (in theory) to invest somehow gets spent in a moment of weakness or financial strain during your life.
- The standard deduction is so high that sooner rather than later the itemized deduction for a mortgage is not worth it after 5 or so years (Unless you have a $300,000+ house)
Another problem is what if the market tanks like it did in 2008? Investment returns aren’t guaranteed, but the lack of a house payment is forever (at least until you upgrade to a larger house…)!
Financial strain happens, and that is why it’s wise to have an emergency fund during this process. While I didn’t have a dedicated emergency fund per se, I had money in diversified portfolio (including fixed income) that I could hit if such a need came to surface.
Since I am mortgage free, and no longer have a mortgage, saving is much easier for me now (after a period of adjustment).
-MR