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In 2022, after 15 years, my spouse and I finally paid off our vacation home mortgage. Now, reflecting on the experience, I can see a threefold advantage to early payment.
This wasn’t my first experience paying off a mortgage early, as we did the same with another rental property in 2015. That time, the decision was fraught with uncertainty as other investments seemed more enticing.
Despite my initial hesitation, I have come to understand and write about the complexities of mortgage payoff, including both the procedures and hidden fees. This knowledge protects homeowners from unexpected challenges once they have paid off their mortgage.
Additionally, I have delved into the primary disadvantage of early mortgage payoff, which is a potential decline in the motivation to earn money.
The Triple Benefit Of Paying Off Your Mortgage Early
The battle between investing and paying off a mortgage has been longstanding. However, by using my FS Debt and Investment Ratio (FS DAIR) formula, you can always find yourself on the winning side.
Let’s delve into the benefits of paying off a mortgage early:
- Guaranteed Return Compared To Potential Loss: The strong gains in the stock market since 2009 have led many investors to chase stocks. In 2022, instead of chasing stocks, I allocated more capital to mortgage principal paydown, resulting in a 23.75% outperformance difference.
- Mental Relief Due to Increased Cash Flow: Enhancing cash flow can be a relief, especially during hard times. Paying off our Lake Tahoe vacation property mortgage, we gained up to $3,500 a month. This is a significant amount that can support family needs like healthcare and tuition.
- More Courage To Live Your Ideal Life: Paying off a mortgage early brings the freedom to relax, retire earlier or follow your passion. The added financial security lets you live more fearlessly and make choices that align with your life’s desires.
Other Considerations
Paying off a mortgage doesn’t always feel impactful, as was the case with my rental property in 2015 when the market was relatively stable. But during a bear market, the value of a guaranteed return increases substantially. It also helps to alleviate stress if you have a family to support.
I’ve also learned that paying off any debt is especially beneficial during a bear market, providing options for low-risk investments like one-year Treasury bonds.
Analogy With Getting A New Life Insurance Policy
The sense of relief I experienced after obtaining a new 20-year life insurance policy was similar to the relief of paying off my mortgage. As a parent with debt, life insurance becomes essential.
Paying Off a Mortgage Early Feels Great
The psychological comfort of paying off a mortgage cannot be overstated. It empowers people to change careers, ask someone out, or face other life challenges without fear.
The Next Mortgage Payoff Conquest
Every step toward paying off debt brings me more happiness. I’m already looking forward to paying off my last rental property mortgage, expecting a significant boost in both my net worth and cash flow.
However, the joy of paying off a mortgage doesn’t last forever, as new financial challenges await. For now, the mental relief from paying off our Lake Tahoe property in 2022 is quite satisfying.
