TAX deductible interest. It's a great consideration that we are having here in the comment section. But since 2017, your mortgage interest may not really be helping your taxes! Learn more in the latest video: kzfaq.info/get/bejne/a72RmLSkzsqaqY0.html

We lived frugally and paid off our mortgage 22 years early. Best thing we ever did. Expanded our business, retired early. Saving and investing. Seeing our grandkids. Volunteering at church. Peace of mind.

I paid off my mortgage and it was the best thing I have ever done for myself. The peace of mind is priceless.

Just paid off my mortgage Aug 9, 2023! I still can’t believe it. I’m going full force on investing now.

not having any debt is peace of mind that you simply can't put a price tag on.

At 25 my wife and I had a stack of cash from working and saving diligently. Put 43% down on a cheaper home in a low cost of living area. About six months later we received a letter from our mortgage holder which showed how much we paid in interest vs principal. I was so upset at the difference that my wife and I walked into the credit union the very next day and paid our mortgage off. I wasn't about to get scammed. Fast-forward six years and we're happy to be mortgage free and chose not to upsize our modest home. Sometimes I wish I invested the money instead, but having no home payment allowed us to both change industries and completely change our life (soo much better work-life balance!). I'm a proponent of paying off mortgages early, because of the freedom it provides! I don't care if you have a 2% interest rate, I'd rather not be forced to work for that payment any longer than needed :)

I’m two weeks away from paying off my second home at 2.75%. With both houses payed off I’m going full stern towards future investing!! It feels great to be mortgage free at 39!!

Some issues that undermine this analysis: First, the TLDR version: 1. Don't adjust your projected rate of return from your investments to reflect inflation unless you also apply the same inflation assumptions to your mortgage rate. 2. The results of your analysis are sound with the mortgage rate and investment rate of return assumptions you used, but a lower mortgage rate or higher investment rate of return would lead to very different results. 3. Being mortgage-free early is valuable, but it's also valuable to have investments that could be turned into cash in a pinch without taking on new debt. 4. You didn't cover the tax implications - the tax hit on investments, or the tax deduction for mortgage interest (although the second is covered in a follow-up video). Now the long version: 1. You took the investment return from 10% to 7% to reflect the effect of inflation. It is very important to understand the effect of inflation on your investments. In 2053, you may look at your portfolio value in dollar terms and have made 10%, but if inflation averaged 3% over that time, your return in terms of purchasing power was more like 7%. This is what you were trying to capture by reducing the presumed rate of return from 10% to 7%. However, you did not make a similar adjustment to the cost of your mortgage payment. You take out your mortgage in 2023 dollars. But you get to pay it off, not with 2023 dollars, but with 2024 dollars, and 2025 dollars... and eventually 2053 dollars. Those future dollars will probably have a lower value than 2023 dollars. Inflation eats away at the value of your mortgage just as much as the value of your investments. So if you have a mortgage rate of 7% but inflation is 3%, your effective "real" mortgage rate is actually just 4%. In dollar terms you're paying 7%, but the net effect on the purchasing power of your net worth is 4%. By applying an inflation adjustment to your investment return but not your mortgage rate, you're not actually comparing apples and oranges. In fact, for those who have a low mortgage rate (some people have a rate below 3%), if you assume inflation of 3%, their "real" mortgage rate after inflation may actually be negative, since inflation is eating away at the value of their mortgage faster than the interest builds up! 2. You assumed a mortgage rate of just over 7% - greater than your assumed investment rate of return. This is what drives your results: your mortgage rate is greater than your assumed rate of return. But for those who have a much lower mortgage rate, this analysis will get very different results. For those who got in when the mortgage rate was 2.5%, 3%, 3.5%, if you can invest at 7%, you're absolutely better off doing that than saving 3.5% or less. 3. You talked about the freedom of being mortgage-free, and this does have value. You addressed the alternative of using investments to pay it off early - and the risk of a market downturn right when you want the cash. Those were all good points. But there's another point to be considered: when you make a payment on your mortgage, that cash is no longer available to you. In terms of your net value, it's reducing your debt, which is good. But in terms of having cash on hand to cover an unexpected expense, it's gone. Investments, on the other hand, can, if necessary, be turned into cash to cover an unexpected expense; if that happens during a market downturn it's going to hurt, but you still have the option to do it instead of taking on new debt. If you pay off your mortgage but don't have much cash on hand, any unexpected expense will be painful and could force you to take out new debt. If you have investments and you have an unexpected expense, you could sell your investments. Of course, a good emergency fund will reduce this risk. But if your emergency fund gets overwhelmed, having assets you can turn into cash is good. 4. Taxes. This can cut both ways. If you do not invest in a tax-advantaged account, taxes will reduce your rate of return. A 7% rate of return might look more like 5% after taxes, depending on your tax bracket. So the nominal rate of return you make will probably be cut down somewhat by taxes. On the other hand, mortgage interest is tax deductible. If you pay off your mortgage early, you cut your mortgage interest payment faster, which means you reduce your tax deduction - and therefore increase your tax liability. Paying only the minimum mortgage payment, on the other hand, will keep that mortgage interest payment and the resulting tax deduction higher. But - many people will be taking the standard deduction, so this won't help them at all. These two effects can offset each other. The followup video linked in the pinned comment gives a good explanation on how the mortgage deduction may not help you. But if it does, this can also help tip the scales one way or the other. One further note: You know exactly what your mortgage interest rate is. If your mortgage rate is 7%, every extra dollar you pay on your mortgage will save you $0.07 per year. Your rate of return on investments, on the other hand, can be variable, depending on what investments you make. (fixed-rate bonds are predictable, but give a lower rate of return.) The S&P 500 has historically averaged 10% in the long run, but there's no guarantee this will continue into the future. If your mortgage rate is 7% and your investments make 5%, you would be better off paying off your mortgage. If your investments make 20%, you should be investing (but good luck maintaining a 20% rate of return over the long run). In the long run, 10% (before taxes) is probably a reasonable prediction, but it's not guaranteed.

I paid off my $187,000 mortgage in 3 years and 3 months. I was investing 15% of my income into retirement but stopped all investing for the last 8 months as I was getting closer to paying it off and I set a goal to pay it off by my 37th birthday. I ended up beating that goal by 3 weeks. I have literally zero debt now. Words can't describe the feeling of peace you get when your house is paid off and you have no debt whatsoever. Now I'm dumping a ton of money into retirement and purchasing several items I was holding off to buy until the house was paid off. I have a couple pretty cool vacations planned for this year too. I will add that I have been a Dave Ramsey listener for many years and his show was a huge motivator for me. Life is great!!

Its a long debated argument but ultimately paying off your mortgage holds much more fringe benefits psychology. Ive done both and once i paid off the mortgage my whole attitude towards work and life in general changed for the better and savig and investing grew expediency due to this change in mind set. You can be bolder and more aggressive once you know your home is yours and it encourages you to grow more like you probably wouldn't when you have a mortgage hanging over you.Great video.

Math is fun. Bottom line: Paying off my mortgage gave me peace of mind which I find absolutely priceless! I followed Dave Ramsey's advice, walked through the baby steps, read Total Money Makeover and went through Financial Peace University. Wasn't easy, but TOTALLY worth it. Cheers!

Paying off my mortgage gave me an ease of mind, which is priceless. Not paying off my mortgage feels like I am borrowing money (paying interest), hoping I have a positive return in addition to my interest rate.

Interesting way to calculate between the two. For us we paid off our mortgage early and took us 8 years of living below our means and putting all yearly bonuses and everything at our mortgage. At age 38 I became mortgage free. Since then I have been maxing out my 401k and Roth IRA and having 0 debt of any kind we built up a 2 year emergency fund in case we lose our job. So glad we did it because peace of mind definitely beats everything as we feel semi retired and no more anxiety of losing our jobs! Also time is the most important to us, instead of 25 years later to be in this situation, we can enjoy it now! It also allows us to save 35-40% of our income and with two kids and funding their 529s it is an incredible feeling!

We paid off our mortgage on August 14th and for me the biggest thing is the freedom. Now we can invest and grow right before retirement or at least that’s the plan. 😊

Many folks have interests rates sub 4% (2.9, 3.1, etc.). I suspect if you ran your calculations with one of these mortgage rates it would show a different story. It might we worth doing a follow up video and showing the math based on various mortgage rates, so that folks could see at what point it is better to payoff vs invest.

Even without a reasonable saving on intrest, a debt free home is priceless.

There is nothing worth investing at this time of uncertainty and volatility. Paying off the mortgage, even at low interest, is FREEDOM - PRICELESS!

I had been weighing the worthiness of paying off my mortgage (around 15+ years left @ 3.875%). If I sell off a majority of my stock portfolio, I could pay off my mortgage loan. However, considering that the monthly mortgage payment consists of (principal)+(interest)+(RE tax)+(home insurance), paying off the loan only relieves me of the mortgage principal and interest portions which is only about half of this monthly expense. I live in a high tax state. Thus, in return for cutting out only about $1K from my monthly expenses, I would lose the majority of my liquid net worth safety cushion along with the dividend income it was generating. I could only conclude paying off my mortgage is not worth the risk.

The other thing to consider is that when you get close to paying off the house, most people paid off even quicker. Not only do you have more money to invest, but you have more money for savings which gives you a more secure future. It’s way better to pay off the house then to invest.

Finally, a financial content creator that I agree with, besides Dave Ramsey, that says it is better to pay off your mortgage than invest the money. I am making crazy extra principal payments (I made 5 principal payments for September), and I am scheduled to pay my mortgage off in 4 years.....cutting 17 years off my 30 year loan by paying it off in 13 years. I started off slow in the first few years, but then my pay started growing, and now it is like a game to throw as much money I can at the mortgage and watch the balance go down. My goal is payoff before my 59th birthday. Great content....you got my sub.

The peace of mind, the ability to live on a single income if needed, the ability to say FU to an ahole employer etc etc biggest game changer, sure investing should be the next step but paying off the mortgage is step one on unlocking the cheat code of life!

We paid off our home, first order of business. Even if dollar-wise it was half the return of investing, there is no security quite as reassuring as owning your home.

The largest advantage is not having to pay the mortgage. In our case that is 36,000 a year savings. Times ten years that is 360,000. And the next advantage is the weight off your shoulders. The third is never having to pay that interest ever again. We have now not paid a Mortgage payment in 11 years. The running joke i say to my wife every month , " its time to pay the mortgage and car payments" She says back to me " we already paid off all those bills" I say " Oh yeah i forgot"

The freedom and confidence gained by not having a mortgage can also increase your income. You'll be better at negotiating and creating additional income streams when you're not desperate to make payments.

Thank you for the video! It’s so nice to see the same minded person! We paid off our mortgage on Oct 2021. It took us 11.5 years to pay it off. In the last 3 years (2019-2021) we lived on rice, beans and veggies (we are vegetarians;) ) During that period of time we also managed to maxed out our 401k contributions. Basically, we were living like students 😅and that was fun!!! Now we are on the Baby Step 7 (according to Dave Ramsey) and we enjoy our freedom 😊

I like the idea of doing a little of both. Either $100 each into investments and mortgage payoff, or maybe do some market timing. For instance, if the stock market has been running really hot, do $200 on the mortgage, if it's been dipping, buy the dip with the full $200. You won't always get it right, but it's kind of scratching both itches at the same time.

Check out the part 2 sequel: kzfaq.info/get/bejne/jciiZpWm3pyznXk.htmlsi=FkyrS_gs9bR03osr

You also have the issue of capital gains taxes. In your example, the guy who invested $200 per month for 30 years is facing a $32,000 capital gains bill. The guy who invested the entire mortgage payment plus $200 for 7 years after paying off the mortgage not only have a larger investment account balance as you indicated, but also a capital gains tax bill of only $10,000. The higher balance combined with the tax savings totals $27,000 more!!!

For every dollar you put into a mortgage, you have to earn $1.40 (because of taxes). Now look at the reverse, the dollar you don’t have to spend on mortgage interest (by paying off a mortgage early) is worth another 40% to you. You can’t be taxed on money you didn’t have to spend on mortgage interest because you paid a mortgage off early. Between that benefit and having greater freedom with life choices, get that debt paid off as early as you can.

One thing to keep in mind is that a person who choose to invest in stocks can also pull from their investments in bad times like a layoff. To do the same with the house you'll want to open a HELOC. However, a HELOC is a loan. That said, if I had a 7% rate on my mortgage I'd want to pay it off early since it's guaranteed money. Today a huge amount of people have a 2%-4% mortgage.

Mortgage free after 7 years. It is the best feeling ever and each time I approach my house, I get teary. Still unbelievable to my husband and I.

We paid of our mortgage we are saving over $3,000 a year in interest and now have very few bills. The house is the money.

The interest rate on your mortgage is critical here. My current mortgage rate is 2.15% So I'm heavily investing in the market so that my dividends will pay my mortgage. From a layoff standpoint, I'd rather have money in the market/bank to pay the mortgage for the time I'd be unemployed. It's really about how much liquidity each person feels comfortable with. For the tax side, I use M1 and can take low interest loans against my portfolio if needed, which is tax free.

I think this is the smartest take I've heard yet on investing vs paying off debt

There is a solidity to paying off your home that is hard to describe to someone who has never done it. It's like the earth is firmer under your feet.

We paid off our mortgage early and never looked back. Can’t put a price on peace of mind!❤

Sure enough, I came to be 58 year old and got the axe (for being at a high pay grade). Luckily, I had paid off my mortgage the year before. And so, I retired comfortably at 58 and lived happily ever after (well, so far). With all my free time, I watched KZfaq videos on how to invest, and the result has been a doubling of my retirement funds over the last three years. This would not have happened if a mortgage millstone was still hanging around my neck. Now I'm collecting Social Security and have not even started to take distributions from my retirement funds. Let em grow, I say!

Good on you for bringing light to this Bob. Lots of people are pulling risky moves without first covering their principal home residence. Investment debt is good, debt on your principal place of residence is bad risk management. You could end up homeless and this ties down a lot of money into a solid piece of investment. Most people would blow the excess money on crypto, gambling or excessively expensive cars/holidays if they had their mortgage money freed up. That way, when they do blow all their money in the future, they are at least mortgage free and safe.

One thing you didn’t take into account was after you paid off the mortgage early, what happened to the extra $200 monthly? If you also invest that then the monthly investment amount goes to $2,432. Which makes your investment returns much more than if you didn’t pay off the mortgage.

This was great. Thanks for making this! I was toying with the idea of building a calculator app that would help with solving this exact comparison. I liked all the numbers you used for your scenario. It played out more or less how I expected ( I was actually surprised that investing the 200$ would in theory beat out paying off the mortgage by an extra 200 in the first scenario even when mortgage rates are at 7%). I liked the amortization schedule you showed. Something else to factor in on the side for why you might want to pay off a mortgage early is to factor in bringing your total equity up in order to not have to pay for things such as PMI, as well as the ability to take out loans against the equity in your home, depending on the interest rates. I've been paying a bit extra each month, and thought it was a little silly as it isn't the mathematically most optimal, but after looking at this schedule, and how sideways the market has been the last couple years, I think it will probably all even out in the end.

You should be working for Dave Ramsay. Your attention to detail in your examples is excellent & realistic. Thank you! A really clear easy to follow example. I’m going to pay off my mortgage. This video is motivating and all the comments inspiring!

I'm planning more next year of putting a little less in my investments and focusing more on paying off my student loans. I know I won't be able to pay off the full 25 grand left with what I make, but I really want to make a better dent in it before the interest completely barriers me. I have made a lot of progress, since I never stopped paying during the pandemic, just smaller amounts, I've already paid off 1 of my 6 loans, and around 1,700 away from another one being done! I don't care if paying them off might lower my credit score, I want to be done with them by around 35.

Hey Bob! Just came across your channel today! Really great content and very informative. We definitely agree on paying off the mortgage. As an entrepreneur, I can't wait until I never owe a single penny to anyone again! Congrats on your success and thanks for the great content!

This is a great analysis. In a time where the trend is to tell people to rent where they live and invest everything else, you do a really god job at explaining the opportunity costs associated with not being mortgage or rent free !

Do some of both. As you get raises and/or continue to work on trimming your budget, you can continue to increase the percentage that you invest and the amount extra that you pay extra on your mortgage. That way your eggs are not all in one basket and you are making gains in both areas.

Don’t forget about refinancing! In a couple years rates could be back down to 3-4%, meaning we can pay off the mortgage even faster if we use the same monthly amount that we are paying now at 7%

It's a pretty complex calculation as you have to consider your interest rate, market conditions and tax impact. If your interest is 7+ percent and you can swing the extra money it's a no brainer, however if your rate is 3% you can make risk free interest at 5+ percent then you may need to think heavy on it.

We paid off our mortgage in June. Give me the freedom to be mortgage free any day. Being in my early 50's I still have time to invest more now before retirement. It's a great situation to be in for sure.

With a 7% mortgage it is a no brainer for making extra payments (or paying it off early)....even use velocity banking (chunking with balance transfer offers usually 3-4% fee + 0% for x months).....for a mortgage under 3%, it's a personal choice (in my opinion)

its really about equal a few grand difference is nothing over 30 years. but its interesting because I watched a video like this before interest rates skyrocketed, it wasn't even close and investing destroyed the extra mortgage payment. very interesting

I have my mortgage locked in at 2.85 percent for 30 years. Investing instead of paying it off is a no brainer.

Im 52 and house is paid off. I'd rather have a paid off house than anything (besides good health) i think its a personal thing and it's about how someone approaches life. Im single so no second income to fall back on, so it is important to me to eliminate or to never saddle myself with debt. Ive always been the type to figure the worst outcomes and living waiting for the other shoe to drop. A nice way to ride out a economic downturn or job loss would be in a paid off house. I was homeless once for about 4 years a long time ago and i think that gave me a permanent fear of being homeless as well

Thank you! I have been an advocate of paying off home mortgage early. Currently, I am 6 yrs away!!!

One crucial thing that wasn’t, surprisingly, mentioned. Without a mortgage the equity on the house is all yours, and it increases with time, often beating market returns!

You included appreciation of your investments but not the appreciation of your house. A true comparison should be the combined return rates of both combined with each strategy.

Well produced, concise, video.. says it all pretty well. I am one of those who opted to refi to 15 from 30 years, and over 24 years and 3 houses later.. paid off the balance.. have no mortgage anymore for the last 17 years. For me, most of the reason for this was that while you talk about layoffs, I saw that ageism has really hit in such fields as tech, and it was increasingly apparent from the early 2000's that being an older worker, candidate for jobs, etc., was going to catch up with me economically.. if I didn't do something SOON. Good thing I did.. when 2008 hit and jobs were scarce.. I had to live on a meager $17K one year! I shudder to think what might have happened if we had stayed the course these "tik tok investors" have all been pushing of leveraging your mortgage debt to build wealth. I agree with your assertion to pay off the mortgage as soon as practical.. and really ANY kind of loans or debt as immediately as possible. You are indeed better off with all of your money NOT going out to curb debt!

Such a common question that comes up and this video effectively illustrates the different options and results for each option. Thank you for sharing 👍👍

Paying off your home is a huge weight off your shoulders! Paid my primary off at 34! Now we work and enjoy life!

This is by far the best analysis on this topic I have ever seen. Great job. Just like Ramsey says you have to take risk into account. You could be laid off. Get in a car accident, blow out a knee. Having no mortgage makes these things way more manageable 👍

Debt is Debt period! Best to have none. I always say wouldn't you rather get 5% than pay 5% ? Being debt free is freedom :-) I am 62 and tell younger people that there is a big difference when you go to work because you want to not because you have to. It stinks to work just to pay bills ! When you have no debt and go to work and actually get paid and can keep and invest it life is good :-)

Perfect video... For me, you can't beat the feeling of no debt.

In your example, at the 23 year mark, once the mortgage is paid off you don't account for that additional $200 per month in your budget you originally had available. So it could, in theory be more.

What people do not factor in is that when you pay off your mortgage you don't save the $2000 a month. You still have to pay property taxes and insurance. All you save is the principal and interest.

Thans for the video. I've been doing a hybird style. Some in investments, some in the mortgage.

If you should pay off your mortgage early entirely depends on the interest rate you have. If you have a 3% rate, ride that to year 30. If you have 7% like in this example, just pay it off, the potential gain from investing is not worth the risk compared to the guaranteed savings.

@7:40 Um....you don't have to try to take your money invested and pay off / put it all to the mortgage at once. Your solution presented seems to assume that you would throw all the investment dollars at the mortgage. Sure you might not have enough to pay the home off but you might have plenty to cover 24 months of mortgage payments while you work on getting another job. Simply take out enough each month to cover a mortgage payment to bridge the gap until you get other work or another source of income. Trying to pay a home off and locking your money up in it and then losing a job with no means to make the mortgage payment is a much worse situation to be in. Just save / invest the extra money. Then when you get to the point that your mortgage balance is the same as your investment account (less any possible taxes) then make that decision to pay off or not.

People also ignore that investing is never a guarantee paying off your mortgage is a guarantee.

Just recently subscribed today after watching a couple of your videos and got 2 videos in one day nice.

I paid off mine when I sold a rental property when prices were crazy. House is only 7 years old best part I can say is peace of mind. You don’t fear a job loss as much when you don’t have $1,600 due at the end of the month. But you also have to remind people you still have to pay the property tax.

Do neither, put your money into cash flowing real estate and your income will pay for your house and you’ll build equity.

Great video, I was just talking to someone about this the other day, they were like invest the money instead, obviously you'd also have to pay taxes on that 40k return from your investments. Call me crazy but I'm going with trying to pay mine off. I have 13 yrs until I'm 65 and have 22 years left on my mortgage. If I ever want to retire I need to get rid of my mortgage payment. I owe 158,000 @ 3.75% my payment is $1450 a month, I figure an extra $500 a month should do it. I do have a 401k and a few small investments but I'm pretty illiterate when it comes to investment. I figure my safest bet is try to knuckle down and pay my mortgage off.

Given 65% of homeowners are paying less than 4%, and 24% of home owners are paying less than 3%, it would be better suited for Americans to see those comparisons versus 7.18% interest rates, unless your motive is to justify paying off your mortgage early versus saving for retirement

When you pay your mortgage off .. you have EQUITY! That you can tap into if needed.

Another point to consider. The moment there’s economic downturn resulting in losses that also likely the moment where you’re going to have more issues paying your mortgage. If you lose your job *and* the value of your portfolio substantially decreases you may actually have to force sell at the worst moment.

Point of order. Given amortization, the "rate of return" on your extra mortgage payments is much less than the mortgage rate, as the majority of the interest is paid in the first half of the term.

This video is like a class on the subject. It is gold, and is a keeper on my Finance list.

It makes no sense in your calculation to adjust the estimated S&P 500 returns to account for inflation the way you did since you are not accounting for the impact of inflation on the price of your home or the true cost of each monthly payment. You should use nominal dollars for this calculation. The annualized nominal return of the S&P 500 is likely to be 10% over the next 30 years even if inflation is eroding purchasing power. If there was 10% inflation for several years and the S&P 500 appreciated at a 17% rate (7% real rate plus 10% inflation), the value of your stock portfolio would be increased by inflation even though the purchasing power only increased by 7% annually - you could sell some of that portfolio to pay off your 7% mortgage early and come out way ahead of where you would be if you overpaid your fixed-interest-rate mortgage each month.

You can go a bit further in this. % yield per dollar actually increases the earlier you are in the mortgage because the interest is spread out in such a way you are paying more interest than principal at the start of the term, and then it decreases the closer you get to the 30 year period. So you should try this again, but pay an extra $200 a month in your mortgage until you have 50% equity in the house and then switch to investing and see what your returns are.

I paid off my house long time ago. Now I am living on dividend investing without worries.

Nice Analysis. Since the total value is similar (paying off early vs. Investing)- it boils down to peace of mind or personal preference. As I did not want to carry a mortgage into retirement, I did a refi from a 30 yr fixed to a 20 yr fixed before interest rates were jacked up. So, in effect, I am forced to repay early. If rates ever go down again, (or when), I could always refi back to a longer term to reduce my monthly burden.

Really great video. I have tried to get my wife to invest in buying a house when the mortgage rate was really low. We were also investing monthly in the market (not that much but still). It was the right decision because now the mortgage rates have almost tripled!

@BobSharpe I want to thank you for this amortization tool you developed. I came across one of your previous videos discussing this topic and I really looked at what it could do for me. I got my house in 2015 at 4.75% interest. With the help of this tool I will have my house paid-off by the end of November of this year. Which means I paid off my 30 year mortgage in under 9 years. My job I currently have affords me the ability to pay $1,000 to my principal payment every 2 weeks. I've had a couple of bonuses earlier this year that I put all of that towards my principal as well. I've thought about making extra payments before, but once I put my numbers into that amortization tool I couldn't believe how soon I could get out from this debt. THANK YOU! THANK YOU! THANK YOU!

It’s all about how high is your mortgage rate and whether lowering it makes sense.

The major flaw in this model is most mortgage payments include escrow payments, which can be 15-40% of your total mortgage payment. Thus, after you finish paying your mortgage, you wouldn't stop paying the escrow(taxes and insurance).

Always situational, there is no one correct answer for everyone. My mortgage is at 2.95%, I only owe $74,000 on the house, and my job is as secure as a job can get, it would be kinda silly for me to pay it off early.

If you’ve ever been through a foreclosure, which can happen for so many reasons including, unexpected health issues, problems with the kids, job loss, etc, you will immediately know the value of paying off the mortgage early. Only then will you understand that you do not own your home like you think you do. Even after paying on time for 20 years, miss a few payments and you will be humiliated, tossed on the street by the bank and treated like a criminal, because you are living in the bank’s house, not your house! And very few people are going to feel sorry for you. No matter what interest rate you have, pay the damn thing off. The bank is itching to take their home away from you. Trust me on this one.

Debt is a slave master, so getting out of debt and staying out of debt is my first goal. I bought a condo cheap in 2019, before real estate prices went through the roof. At the time, I took out a 30 year fixed mortgage at 4.75%. One year later, I refinanced to a 15 year fixed mortgage at 2.75%. I also opted to pay my mortgage bi-weekly, which gives me one extra payment towards the principal every year. On top of that, I make a $100 principal-only payment bi-weekly, as well. This gives me an extra $2,600 per year off my mortgage principal. Over 2 years, I have already reduced my mortgage pay-off time by 13 payments, or 1 year and 1 month. Note that I also pay off the balance on my credit card before interest accrues (after earning rewards).

Awesome insight, thanks for the eye opening video ! I’m also trying to pay off my mortgage early (3.5%apr) and at the same time paying extra on some other loans I have both at 5 and 7.5%. When I’m done with those, I will use that money more aggressively in the stock market…complicated, but like you, I don’t like unknowns and will feel more secure when I pay off my mortgage

It depends on the mortgage contract, but, generally once a year if you make 1 extra payment towards the just the principal, you will shorten your 30 year mortgage to about 17 years.

This only makes sense if your interest rate and rate of return are similar. If you locked in a 3% mortgage like many did during the pandemic it makes no sense to pay off early and invest extra money you have for 30 years instead

I paid off my mortgage in 2022 and never looked back. Investment gains come and go but debt stays forever until its paid off.

Paid mine off in 33 months. Allowing me to follow my dreams in business. I've never heard someone who regrets paying off their mortgage early.

Bob, what happens to the numbers if you factor in possible withdrawal penalties and taxes on the investment gains?

Peace of mind is worth more. Life can throw you a curve ball down the road and you can pause investing to deal with it, but you can never pause paying your mortgage.

Good information, thank you. I think you overlooked another important aspect of paying off early, and that is having that much more equity in the home. That's more 'money' in your overall net worth, in the 7 year shortened term.

Bob, I'm in a tough situation my mortgage is locked in at 3.3% and my payments are only $825 monthly (P&I), I invest almost 40% of my annual income (making six figures) and have no other debt. In a 2-3 years I will have enough cash just in my personal brokerage outside of my multiple retirement accounts to pay off the remaining balance but do I really wanna tie up $150k in exchange for $825 back in my pocket ugh lol.

This analysis needs to consider capital gains taxes. Even 401k and IRA withdrawals are taxed.

It depends on your interest. My rate is 2.9 percent but CD’s are paying almost 5 percent. It’s a case by case basis.

Thank you so much for this. After I paid off my mortgage I wondered if I should have invested extras instead….. because the banks and investors will tell you to invest rather than pay it off early and most people believe that. I’m glad I paid it off early.

For those that dont want to invest in the stock mkt. CDs are back to 5% ish.