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It’s not an either-or world

It’s not an either-or world

Spend some time in the personal finance blogging world, and it won’t be long before you hear the debate: is it better to pay off your mortgage ahead of schedule or keep one forever?

Those in the pro-pay off the mortgage camp talk about the sense of relief you get when you don’t owe money to anyone, the sense of satisfaction you get when the house is really your own, the extra money you have each month because you’re not sending it to the mortgage, and the guaranteed return on your money.

Those in the keep-the-mortgage camp talk about tax deductions, the opportunity to earn a greater return on the money in the market, the opportunity to borrow even more money against the home (via a home equity loan) for still greater investments in the market, and how little effect paying off the mortgage will have on their day-to-day finances anyway.

The thing is, it’s not an either-or world. You can do things in moderation too. You can keep the mortgage for awhile, and eventually pay it off. You can pay it off on an accelerated plan, but also invest moderately. You can do a combination of things that best suits your individual plan.

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That’s what most people forget — there’s no “right” answer; there’s only what’s the most right for you. Our personal plan is to pay off our mortgage within the next 3 years, while investing and building up savings in the meantime. And that tax deduction thing? We don’t get it anyway, so it’s not a factor. We’ve chosen to take a more moderate approach, one that best suits us and our own personal financial outlook.

View Comments (7)
  • I’m in the same boat — I’m paying down my mortgage aggressively *and* investing at the same time.

    I admit to being more a fan of the the “pay down the mortgage” approach as, like you, I can’t quite grip the “tax deduction” advantage. It’s just not enough of an advantage (um, like, NO advantage) for me to be swayed… ;0)

  • Yep… there are a lot of issues like this one floating around the PF blogs. You just have to do what’s right for you and your situation, with your best judgment. There are so many variables in personal finance that it’s impossible for one person to say what someone else should do… for the majority of these issues.

  • Just a fun side story along these lines… My grandfather recently made the final payment on his mortgage. For the past umpteen years, he has paid a whopping $60/mo for his (very nice 3-bedroom, downstairs-gameroom) house. Including property taxes. Now THAT was a good deal, hmm? I’m sure the bank declared a holiday when they finally got the last payment on that – can you imagine?

  • Just wanted to let you know that you hit it dead on. “. . . what most people forget — there’s no “right” answer; there’s only what’s the most right for”. . . them. It is great reading what everyone is doing but everyone should build their own plan.

  • Wow, Rini, he could have bought cell phone service for that price. What was he thinking getting a house? ;)

  • I’m still trying to do both. I wouldn’t want to go all out for paying the mortgage
    off and not having any savings or investments. With the standard mortgage term
    still 25 years, if I can get it paid off in less than 20 years I’ll be happy.

  • I have a paid for one bedroom condo in Florida and boy, am I glad with the economy the way it is. My “basic” living expenses for the condo are $504 (maintenance, power, phone/internet/cell phone, property taxes and homeowners insurance) which essentially could be paid out of unemployment if worse came to worse. I was never able to claim the tax deduction so I decided that for me, nothing was better than a paid for home. Just knowing that no matter what, my home will never be taken away (unless I can’t pay the maintenance and taxes) is a huge mental relief. Just my two cents worth!

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