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Should You Pay Off Mortgage Early – Or Invest?

by Jason on June 1, 2010

Ever ask yourself this question?

What’s better – to pay off the mortgage early or to save and invest more money?

My guess is that we’ve all asked this question at some point or another.

Maybe you’re thinking about refinancing your mortgage and looking at how you could pay off your mortgage early.

Paying off the mortgage early is a goal that a lot of folks have and are committed to make happen!

But what is your mortgage payoff?

How much extra cash do you need to throw down on that loan to get to your mortgage payoff?

How much interest would you actually save?

How many years would you cut down on your loan with an early mortgage payoff?

Should you even try to pay off your mortgage early, or is it better to invest your money?

Those are the questions we want to look at today and I’ve got a great little calculator for you as well!!

Benefits to an Early Mortgage Pay Off

  1. Peace of Mind – you can rest easy knowing you’ve got no liabilities!
  2. Increase “Imputed Income” – This might be more of an ethereal benefit, but bear with me – Let’s say your mortgage payment is $1,200 per month. If you are in the 25% tax bracket, you have to earn $1,600 to net $1,200 after taxes.  So basically not having to pay $1,200 a month is like earning $1,600 tax free!
  3. Increase Savings – once you’ve paid off your mortgage you can really start socking some big money away.
  4. Increase Giving – without having a mortgage payment, you can use that money to help the needy, give to your favorite charities or increase the giving to your church.
  5. Increase Net Worth – this is obvious here, but worth noting.  Net worth is simply everything you own minus everything you owe.  Take away the liability and your net worth increases dramatically, which is creating wealth!
  6. Increase Freedom – what I mean is that you no longer have to work just to maintain your liabilities, but rather having no mortgage or no debt frees you up to pursue things like your passions and your purpose!

So, as you can see there are some pretty big advantages to knocking out that mortgage!

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Concerns With An Early Mortgage Pay Off

  1. Opportunity Cost – If your mortgage rate is only 5%, but you can get 8% in the market, you are giving up 3% by paying off your mortgage.
  2. Lack of Liquidity – Instead of building up an account (whether a non-qualified brokerage account or a Roth IRA) that you can access should you need it, your money will be tied up in the equity of the home.  Sure you can get access through a home equity loan, but you have to pay interest on that.
  3. Missed Tax Advantages – You can’t write off mortgage interest if there is no mortgage interest.

Those are the three main concerns I see with paying off your mortgage early.  Maybe you can let us know of some other concerns or disadvantages to paying off the mortgage early.

Instead of just choosing one way or the other, maybe you want to pay off your mortage AND invest like Nickel is doing from Five Cent Nickel!

Mortgage Payoff Calculator

So maybe you’re wondering what it would take for an early mortgage payoff?  How much would you save by paying the mortgage off.

Here’s is a handy Mortgage Payoff Calculator compliments of

Check out ChristianPF for some advice on how to pay off your mortgage early?

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What Are Your Thoughts?

Readers, what do you think – should you pay off your mortgage or invest?

How many years would you trim on your mortgage by re-doing your budget and throwing some extra cash on that loan?

If you’re just starting out on the journey of home-ownership, I suggest you pre qualify for mortgage and lock in a great interest rate today.

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