Should We Pay Off the Mortgage?

To pay off or not to pay off our mortgage – that is the question we are facing. Now, we don’t have enough cash sitting in savings to pay it off with one fell swoop, but we could make a sizable dent and finish it off in the next five years or so.

While the thought of living mortgage-debt free is certainly appealing to us, the thought of draining our current cash reserves is frightening.

I’m a big believer in families maintaining a one-year emergency fund. In this economy, it might take at least that long just to get back on your feet again after a job layoff or major illness.

I also have reservations about diverting new earnings from saving and investing in an attempt to pay off my mortgage early.

The market isn’t necessarily cheap, but I believe there are a few good deals out there (particularly among high-dividend stocks).

And of course there are the usual needs such as college savings for our kids, saving for our own retirement, etc. So, I must be crazy for wanting to pay off our mortgage early…right? Not exactly.

One way to reach mortgage debt freedom faster is to purchase a foreclosure, clean it up and live in it.

Living Mortgage Debt Free

Imagine for a moment that you no longer have a mortgage payment due every month. Sounds freeing, doesn’t? It is.

I’ve talked with a couple friends who have paid off their house early and they say it opens up a world of opportunity because no matter what occupation you choose, you only have to have enough to meet your basic monthly needs (and enough to put a little away for later).

No big mortgage payment to force you to stick it out at a lousy job.

That sounds pretty appealing to me. I spent a lot of time in a lousy job when I was deep in debt because I felt trapped. No way I could leave a decent-paying job, no matter how dead end it felt, when I had a mortgage and other debts hanging over my head.

Even though we’ve managed to clear some of the other debts, that thirty year mortgage is still there, hanging over us every single month. I like the idea of just eliminating that payment and saving that same amount every month.

Imagine if you could save $1,200 a month. Imagine how fast you could build wealth. And without that $1,200 payment, imagine how much easier you could weather a financial storm than your neighbors.

Should I Pay Off My Mortgage Early:  The Math

Obviously, the math doesn’t always support my crazy ideas. After all, mortgage interest rates are historically low these days.

It is hard to argue paying off a sub-5% loan early to put the money is a 1.75% CD, or expose it to market risks in a market that has already enjoyed a nice run.

Then again, to heck with the math. I’m not considering this move because it makes sense mathematically. I am considering this move because it will help me sleep at night.

I know that no matter what happens down the road, my family will always have a place to sleep, assuming we pay the property tax bill each year (seriously, do we ever really own anything outright?).

Not that I needed much convincing, but I think we will make paying off our mortgage a five year goal. So before my wife and I turn 40, we will be living without a mortgage.

You heard it here first. More to follow on our actual plan to get there.

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