Paying Off Your Home May Not Provide The Joy You Expect

Thanks to reader feedback, I realized one financial move that was not included in my top financial moves to relieve stress list, was paying off your home.

Even though I thought long and hard about what to put on the list, paying off your home didn't get a dedicated bullet point, just an add-on. Paying off your home may not provide the joy you expect. And if it does provide you joy, it will only be temporary.

For those who are intent on paying off your home ASAP, let me share some perspective from someone who has paid off two mortgages and still own the properties today.

Experiences Of Paying Off Your Home

We all have different opinions, experiences, and biases. These differences are why I enjoy reading about various perspectives. Here is the feedback from two readers who paid off their homes.

I think paying off the primary residence mortgage would easily be my #1. If the mortgage is paid off and you die prematurely, the spouse and children won’t ever be forced to downsize to afford shelter. Further, the emotional trauma from your death won’t be compounded by having to move to a lesser home and neighborhood as well.

In this situation, the kids are likely getting uprooted to a new school system and then lose contact with all their friends as well. That's way too much trauma. It can be avoided if there is no mortgage payment.

– CMAC

Number 1 for me was paying off my house. Nothing financially has relieved more stress and provided more happiness.

Number 2 paying off my business credit line.

Number 3 paying off my business.

Number 4 doing a will and trust

Number 5 paying cash for my daughter’s college

– Bill

Why Paying Off A Home May Not Bring You Stress Relief

I've personally paid off a vacation property rental, a rental that used to be my primary residence, and purchased a primary residence with cash.

The feedback from the two readers made me question why I didn't give “paying off a home” a dedicated bullet point in my post. In fact, before I read these two comments, I had forgotten I had ever lived in a paid off home between 2019 – 2020!

Here are the reasons why paying off a home might feel disappointing after.

1) Ongoing property taxes

Even if you pay off your mortgage, you will still have to pay property taxes forever. If you don't, your house will eventually be repossessed.

For example, the fixer I bought in 2019 for cash has an annual property tax bill of ~$23,000. Half the amount comes due on December 10 and the other half comes due on April 10. Every property tax notification I receive reduces my joy of having a paid off home.

Then when I read about corruption at the San Francisco Department of Building Inspection and the city wanting to fine homeowners for putting up tiny library houses, I get annoyed. There are bigger issues the city should be focusing on.

When you invest in private real estate funds, you still pay ongoing property taxes. However, the costs are just a number embedded in a spreadsheet dealt with by other people. Therefore, there is no property tax or maintenance stress. All you care about are the net returns as you sit back and enjoy life.

Check out Fundrise, my favorite private real estate investment platform. Fundrise manages over $3.5 billion and has over 500,000 investors. The funds investments primarily in residential real estate in the Sunbelt, where valuations are lower and gross rental yields are higher.

Cities with the highest and lowest gross rental yields
Consider investing in real estate in cities with the highest gross rental yields

2) Ongoing maintenance issues

Every time there is a maintenance issue, my stress level goes up, not down. A fixer that took two-and-a-half years to remodel has already experienced a cracked kitchen pipe, a blown down fence, and a mysterious fire alarm, which was hilariously resolved.

I will eventually also have to spend ~$18,000 to replace its roof and another $3,000 to replace the upstairs furnace. Upkeep is all part of owning physical property.

I've only been in my primary residence since 2020. However, I've already had to replace a door handle, several rotted wooden deck planks, and fix a leak during a torrential downpour. More maintenance issues will inevitably appear over time.

3) Negative real mortgage interest rates

Although I've never regretted paying off a mortgage early, paying down a negative real interest rate mortgage is not an optimal financial move. The higher the negative real interest rate, the worse it feels paying off a home.

For example, I've got a 2.125% interest rate on my primary mortgage. With risk-free investments paying 5%+, there is no way I'm actively paying down extra principal at this time. It gives me more stress relief to arbitrage the difference and live for free!

However, if my mortgage rate was at 6% and I could only earn a risk-free return of 2%, the paying down a mortgage early would absolutely provide stress relief. But you've got to completely pay off the mortgage to free up cash flow. Otherwise, you're still paying the same mortgage payment amount, it's just the percentage split between principal and interest changes.

In normal times, most mortgage rates would be higher than the 10-year bond yield. But we are not in normal times, so please take advantage! The inverted yield curve won't last forever.

When you are able to live for free, you feel like you have won the lottery. You're already borrowing money for cheap to live in a nicer home than you can afford with cash.

active primary mortgages by interest rate - two-thirds of primary mortgages have an interest rate below 4 percent

4) Investing FOMO

Paying down a negative real interest rate or a low mortgage means living less for free, which may raise your anxiety a little bit. However, more powerfully, paying down a mortgage means you could be missing out on much greater investment gains.

Investing FOMO is difficult to overcome. It's why rich people still take unnecessary investment risk!

In a bull market or an economic rebound, you want as much risk-asset exposure as possible. Therefore, it will feel better if you pay down your mortgage right before a bear market occurs. Of course, timing the market is extremely hard to do.

For example, there is currently artificial intelligence mania here in the San Francisco Bay Area. If you don't find some way to gain exposure, you might feel more anxiety because you're missing out.

Instead of paying off a home to save 2% – 6% on mortgage interest expense, you may be more inclined to allocate capital to an AI investment to potentially make way more.

Found A Way To Invest In AI

Luckily, I found an open-ended venture capital fund called the Innovation Fund, which has invested 35% of its capital into artificial intelligence. I plan to invest $500,000 into venture capital funds that have AI exposure so that my kids don't ask me in 20 years why I was asleep at the wheel!

I don't want to miss the boat, which is one of the reasons why I wrote, How I'd Invest $1 Million Today For A Better Tomorrow. Writing these posts forces me to think more deeply about allocating capital.

Public stocks and real estate doing well

Since 2020, the S&P 500 has also done well. Despite a bear market in 2022, the S&P 500 came roaring back in 2023 and in 2024 so far. In addition, bidding wars are back here in San Francisco thanks to a recovery in tech, pent-up demand, and a strong economy overall.

Below is a home that was asking $4.7 million and sold for $5.7 million in one of the best neighborhoods in San Francisco.

Paying Off Your Home May Not Provide The Joy You Expect - home selling for $1 million over asking

5) Financial wins never elevate your happiness for long

Sadly, due to hedonic adaptation, we quickly revert back to our steady state of happiness after achieving any type of success.

If you pay off your house, you will feel an elevated level of happiness for maybe up to six months, but probably closer to one-to-three months. After that, you will simply take for granted you no longer have to pay a mortgage. The extra security you feel is marginal because of ongoing property taxes and sporadic maintenance issues.

The biggest security boost you get when owning a home is when it was first purchased. If you continue paying your bills, you will feel good knowing nobody can raise your rent or kick you out.

Since you worked hard to pay down your mortgage, you will feel more deserving of a paid off home. The more deserving you feel, ironically, the less financial joy you will experience. I've written about this in a post entitled, Overcoming The Trough Of Sorrow.

Paying off a home is a great achievement. But most people won't appreciate it for very long once it's done.

Perpetual Versus Temporary Financial Moves

No doubt paying off a home will bring you more peace and less financial stress. However, because there are perpetual taxes and maintenance costs to pay, the financial relief may not be as great as expected.

To help you feel better about paying off your home, think about the payoff as a perpetual way of no longer paying rent. If you tell yourself this, then you may feel better.

Out of the ten financial moves I recommend people make, the greater the permanence of the financial move, the more it will relieve stress and anxiety.

For example, once you create a revocable living trust and a death file, you and your heirs are covered for life. You don't have to worry as much about your dependents not gaining access to your funds when necessary. There are also no ongoing costs to pay. Ah, that feels great.

If you have investments that generate perpetual passive income to cover your basic living expenses, then you feel like you can take on the world without much fear. Wonderful!

But someone needs to stay on top of the investments because it can sometimes feel like a full-time job. As a result, you need to insure you have a backup person to manage your money accordingly.

Term Life Vs. Whole Life

Getting an affordable 20-year term life insurance policy felt the best to me partially because it buys me 20 years of security. I'm confident that in 20 years, I will not have any more mortgage debt left. Further, my children should be mature enough to survive independently at ages 23 and 26.

But given I just talked about the importance of permanence, it is logical to conclude that getting a whole life policy (lasts your whole life) will provide even more comfort. This is especially true for those with family members who may struggle with mental and/or physical health conditions.

Yes, a whole life policy is more expensive than a term life policy. For most people, it's better to get a term life policy as I have done. But if you have dependents you worry about and grow your estate to a top level, having a whole life policy may be a better choice.

In retrospect, I probably should have gotten a whole life policy back when I was 30-35. The cash value of my whole life policy would be worth in the six figures by now. As a compromise, I tell myself I did the best I could in saving and investing as much as possible since college.

Check Policygenius if you're looking for affordable life insurance quotes. You can get multiple real quotes all in one place. Both my wife and I got new 20-year term life insurance policies during the pandemic with Policygenius.

Paying Off Your Home Is Fine

If you want to pay off your home sooner, go for it. If you've paid off your home already, congratulations! Life is so much easier once your living expenses are low.

I'm just warning you about the potential let down you may feel if you're currently attempting to pay off your home earlier. The harder you work and the more you sacrifice, the less satisfied you may feel once your home is finally paid off.

Based on the comments in this post, I realized something else important about paying off your home. The greater the value of your home as a percentage of your total net worth, the more joy you will feel paying it off. This makes sense given there's more risk at stake.

In conclusion, I wouldn't concentrate all your efforts on paying off your home ASAP. Instead, be dynamic in your financial decision making based on the economic conditions at hand. Diversify your financial moves to help bring greater peace of mind.

Perpetual or temporary, everything becomes temporary if you give it enough time. Try to make the most of each day.

Reader Questions And Suggestions

If you've paid off your primary residence, how long did the joy last? Or did you feel a let down once your home was paid off? Does anybody regret having a tremendous amount of capital locked up in one's home? Being house rich but cash poor can be stressful.

To invest in real estate more strategically check out Fundrise. Fundrise real estate funds predominantly invest in residential real estate in the Sunbelt, where valuations are lower and yields are higher. I've personally invested $954,000 in private real estate funds to diversify and earn 100% passive income.

nother great private real estate investing platform is Crowdstreet. Crowdstreet offers accredited investors individual deals run by sponsors that have been pre-vetted for strong track records. Many of their deals are in 18-hour cities where there is potentially greater upside due to higher growth rates. You can build your own select real estate portfolio with Crowdstreet. 

Both platforms are sponsors of Financial Samurai and Financial Samurai is an investor in Fundrise funds.

For more nuanced personal finance content, join 60,000+ others and sign up for the free Financial Samurai newsletter. Financial Samurai is the best personal finance site today.

85 thoughts on “Paying Off Your Home May Not Provide The Joy You Expect”

  1. There’s difference for mortgage in US and Canada.

    In Canada, mortgage interest rate is reset every 5 years regardless if it’s fixed rate. By paying it off, we remove the exposure to interest rate risk every 5 years. Back in 2010, 5 year fixed was 2.25% in Canada. Now it’s 5%! People locked in the COVID low 1.5% 5 year fixed in 2020 and will face a much higher rate in 2025 renewal.

    In US, rate stays the same for the whole amortization period. Still, for old mortgage, it makes sense to pay it off lumpsum at some point as mortgage balance gets smaller. The payment yield will increase. Near the last few years of term, the payment yield can reach as high as 10% to 15% even though the actual interest rate is 3%.

    Removing the mortage payment by paying lumpsum is equivalent to getting a permanet fixed income equivalent ot mortgage payment without market risk, even bonds suffered huge loss in recent years.

    1. Thanks for sharing Kyle. In the U.S., we also have adjustable rate mortgages, that reset every one, three, five, seven, and ten years. They account for less than 8% of all mortgages. We have more choices.

      I took out a 7-year ARM in 2020 to buy one house with a 2.125% mortgage rate and I don’t regret it.

      In August 2027, when my mortgage reset rests, the balance will be less than half of what it was and I think mortgage rates will come down slightly from here.

  2. Gerald Giovannelli

    Excellent piece.

    Some Veterans do not have to pay property tax. How would this change/add to your article?

  3. I enjoy reading your article. I think your points are suitable for financially savvy and risk taking investors, but not for the average person like me.

    I am planning to pay off within next 5 months. Already paid-off 98% of the loan/home value. Within the last 12 months, I paid off ~50% of the loan. I do not have any regrets… I feel happy.

    As long as you have the house, the property tax and maintenance expenses are always going to be there.

    If you have mortgage and if you are temporarily unemployed for some reason, you need (Loan payment + property tax + maintenance) every month. But if you paid-off your loan, then you only need (property tax* + maintenance). You do not need 3 to 6 months of mortgage amount sitting in your emergency fund (which is usually kept in savings or money market accounts that pay lot less).

    [I understand you do not pay property tax monthly, I am prorating that to monthly]

    My current loan interest is ~3.0%. If I earn ~5%, it is not net 2% earning, I will pay tax on that earning which will reduce the net earning to ~1.7%. Additionally, the liquid money may tempt me to buy unwanted items.

  4. Robert Ruschak

    This article makes no logical sense to me and lets keep it very simple!
    You pay off a home= no principle payments, no interest expense payments, no PMI and that depends on your mortgage and less stress! All you have to worry about is the never ending real estate taxes, insurance, maintenance and repairs and CapEx.
    Some individuals will borrow against their home to invest into “AI”, home flips, AIRBNB or whatever.
    Lets compare paying a $1 million primary home in cash vs zero percent financing!
    1) Pay $1 million in cash for a home! You can refinance and use that capital for xyz.
    2) After a 30 year period, your total amount spent will be $2.81 millions plus.

    The taxes people pay in San Fran are INSANE!!!!!

  5. I love that I paid off my mortgage, because now I have the P&I portion free for all of that maintenance you say houses need. (I completely agree with that, and now I have more free cash flow to cover those needs, either reactively or proactively.) And while I could have just invested in the market, I had a higher rate (5%; never wanted to pay a fee to lower it through a refinance, so instead I accelerated payments) so it provided a decent and certain return on money put in. I really enjoy getting the property tax bill each year rather than have it go to a mortgage company, too, and it’s nice to know that all I need to do is generate enough income to pay the couple thousand in taxes I owe each year. (It’s a perfect little goal for passive income!) The biggest let down? My credit score has dropped a bit from where it used to sit, apparently because now I don’t have that long-term account on there. (For some reason, 20+ years of credit cards still nets me a “not a long enough credit history” on my score report. This is a whole other topic, but I don’t really care about the credit score anyway since I’ve come to believe that credit scores and bureaus are one of the biggest financial frauds of our time. I’ve paid every credit card balance in full each month and I’ve never been delinquent on any payment, yet the score is very good but not perfect.) If a small hit to my FICO score (a made-up score that I don’t plan to use ever again) is the biggest negative I got from paying off our mortgage, then it was a win for me.

    1. Yes that fico score is bull! Its fraud 100%. It makes no sense that after you pay something major off its now a negative when if you pay late its also a negative. So logically speaking they are saying pay on this forever and thats the sweet spot. Incidentally the only winner there is the loan company who is in bed with the fico system.

  6. Frugal Bazooka

    Sorry, but let’s agree to disagree. Nearly every day since I paid off my mortgage I have been celebrating in small ways. I can’t think of anything I’ve done financially that comes close to the joy of paying off my mortgage. Even my mid 7 figure relatively liquid “fortune” just doesn’t quite do it. When people talk about the “rat race” and all the problems and burdens of contemporary American society inevitably they point to their mortgage as the primary burden…the monkey on the back of financial independence. I agree with them. Even though my brain tells me that the mortgage is just another debt, there’s something about the house, the home, the domicile, that makes that particular debt different. If someone repos your car, you can ride a bike. If the bank repos your house you are homeless, no roof, no shelter. That’s a pretty big psychological mountain to climb.
    In terms of celebrating with the money we saved, it’s been fun. First we decided our air travel would be 1st class from now on. What a difference it’s made in lowering the anxiety associated with flying. We also travel anywhere in the US without worrying about the cost. We also get to eat at some of the best restaurants if we want to – if you haven’t tried STK in Vegas, I highly recommend it.
    Some other great things we get to do with our money: Give our grown kids financial help, give our grandkids cool gifts, buy a car for cash, fix up the house without waiting for the price to drop and on and on.
    Paying off the mortgage has been the best financial move we’ve made so far and I suspect it’s even more so for those of us who are below the $300k income level.

    1. That’s great to hear. Sounds like your home is a good percentage of your net worth? If so, can you share what it is?

      Perhaps it’s because I never restricted my spending when I had a mortgage, that’s the reason why paying off the mortgage hasn’t done much for me. I still went to those steak dinners at STK, flew first class, and traveled to over 60 countries since I retired in 2012.

      So maybe that’s the lesson for folks. Try not to restrict your lifestyle too much before you pay off your mortgage. Because life is what happens every day.

      1. Frugal Bazooka

        The house value is currently nearly 25% of the overall portfolio. As we continue to upgrade I expect it could get to 30ish %. During Covid the value doubled and then cooled back down but it was all gravy either way because the house is paid for. You’re correct that we lived frugally for about 10 years while our kids were growing up, but prior to having kids we lived like rock stars for a few years so we had a taste of the good life and paying off the mortgage allowed us to do it again but much better and more grateful for our good fortune. Using our frugality muscles in surgical ways have allowed us to compress and hyper speed our financial growth to the point where we could take our foot off the brakes sooner than most of our peers. Not all of our happiness is related to paying off the mortgage as that was just one of at least 10 financial goals that allowed us fin freedom. But I’m not gonna lie…being free of the mortgage ball and chain gives me endless satisfaction!

        1. That is great to hear. I have four kids and for me, getting rid of the mortgage will simply free another $650 per month for giving and investing. It will be great to have more margin for breathing! I always put investing into retirement and the kids’ college before putting extra to the mortgage, but for some reason, the tangible goal of “kicking the bank to the curb” and owning the home free and clear is something the excites me. At that point (about a year from now) my wife and I will be completely debt free, which will be a great place to be!

    2. I want to cry reading this. Let’s me know I am not just a fool wanting to pay this monster off. I have had housing insecurity in my life. I have had job insecurity all my professional life. I made the decision to create my own “job”. Hired myself and never regretted it because I am a great employee and boss! But the decision to remove the other latent feeling of insecurity was to pay off my house. I am on a 5 year plan to do that. Im excited and it has given me new life. When covid hit and I lost my job for the umpteenth time in my career the first thing I thought was how will I pay for this domicile which would represent a place for my entire family to live if needed during the pandemic. I “made” a job and decided never again to rely on a job or the government again. But also the nagging feeling of this huge mortgage bugs me constantly. As you said no roof over head. No way to help adult children should they need it etc. So I decided go against grain of sound advice from financial experts and soothe my feeling of potential housing insecurity and pay it off. All your reasons resonate with me. I am now 100% secure in this decision. Good to hear your reasons!! Thank you. You don’t know how helpful you penning your reasons has been to a complete stranger!

  7. What’s your take on how much higher the risk free rate needs to be over your mortgage rate before it swings in favor of investing? With rates above 5% I would say my 4% mortgage is not worth paying down. But if those drop down below 4.5%, I think the mortgage becomes more appealing. This is without taking taxes into account; purely from a psychological standpoint.

    1. No definitive answer. Ideally, the risk-free rate only about 25% higher than your mortgage rate, to account for capital gains tax,, before paying down your mortgage. But it’s really an individual choice.

  8. I paid off my 275k home during Covid. It certainly felt good for a few months however watching the market take off made me kinda regret it and now that the risk free rate is 5% I wish I wasn’t in such a hurry to payoff my 3.3% Rate. Hindsight however is 20/20. —on the flip side It’s great not having a payment and I found my risk tolerance increasing quite a bit as I have been more aggressive with my portfolio.

  9. Alyssa McPherson

    We left CA in July 2022 and moved to a state with a better cost of living and much lower property taxes. We only pay about $3500 per year on a $750K home. We paid more than that on our home in CA that was assessed in 2006 for $425k. We sold it for over $1.8 and paid cash for our new home and had $$ left over. Leaving CA for a more affordable state has enabled us to semi-retire and look forward to a future that we could only previously dream about. Best decision we ever made.

  10. When I lived mortgage free, I didn’t feel like working anymore. I was too young to quit working but it felt like I no longer had a fire under my butt. I also wasn’t willing to earn a lot and was happy w what I was earning and losing out on potential. Moved and got a mortgage and not inclined to pay it off at such a low interest rate. And to make sure I keep working!

  11. Dunning freaking kruger

    We are on a 10 yr FRM at 2.45. Plan on paying house off in 26 months. Seeing the mortgage melt is very satisfying.

    Currently investing 12,000 monthly
    Into equities. Once the house is paid that should bump to 16,000 + monthly. We are stock piling for a Cabin in the woods at the same time.

    We expect some satisfaction and relief with a paid for house. But the real focus is to allocate more money monthly for investment. We complete ROTH conversions each year as well.

    The house will be around 30% of our assets. It will be dropping percentages per year as we invest larger amounts.

  12. When I paid off my primary residence early in 2016, my reaction was meh. When I sold and moved to my next place in 2017, I took out a mortgage and invested the rest. I’m much happier with my vanguard account now being twice the amount of my mortgage.

  13. Duplex dude

    I dig your book I bought it when it come out and feel that I made more optimal choices in life than not. Here’s my approach to owning a paid off home. In my 20s. I bought a duplex its in a lower cost of living area. I live in one unit and rent the other one out. I had it paid off by the time I was in my 30s. I bought it for 150k put 50k down and then used the rent payments to pay it down while I was still paying off the mortgage each month. My fixed expenses, utilities, property taxes, insurance and all that I could have paid for by the rental income. The rent has gone up, a fair amount. It’s now at $1,000 a month. So I feel like if you owner occupy a rental property like this that is a whole other factor to consider. I still get the tax breaks, the income generation, the write offs all that stuff so I have something that’s going up in value and generating money at the same time. I don’t own any other properties and I’m not really interested in expanding, but this duplex has been totally worth it. Thanks again for your site and your book Sam.

  14. Read this piece with interest as I have newly discovered your book (really it it – original and grounded – and I’ve read dozens of personal finance books). After always pushing back on paying down a mortgage, we paid off our 5.5% mortgage in 2007 all at once after cashing out all our investments in 2006 and watching the money just sit there. It took years after that for the lightening bolt of happiness to not hit us a couple times a day. We live in a low-tax state in the west so the other home expenses are very low. After we paid off the house we immediately directed 100% of the saved payments into our Vanguard fund. It was a good choice for us. But likely wouldn’t have done it if the market hadn’t been as wobbley in 2006-2009.

  15. Hey Sam! Hope you’re doing well today.

    I’ve been wondering for years if you should invest more or pay off your home early. So, I really like your FS DAIR model as it is a good system of doing both.

    I have a question for you. We’re trying to retire early in about 10 years. That would put me at 55 years old. While it’s thankfully not happening now, I was either underpaid or severely underpaid for much of my career, so I wasn’t able to even think about retiring like a FIRE person.

    We have two rental properties in San Diego, and we figure the way we could potentially retire at 55 is by paying those off early and living off the rental income while our retirement funds continue to grow. Would you still suggest FS DAIR or would you suggest doing our best to throw all of our extra into paying off those rentals as soon as possible?

    Thanks for your time and for all the knowledge, I’m grateful!

  16. I was in the don’t pay it off early camp until my situation changed. My house was hit by hurricane. When you have a mortgage, depending on the amount of the settlement, the check will be made out to you AND your mortgage holder. The mortgage holder will only disperse payments to you and your repair contractor(s) by the mortgage company’s arbitrary rules. The mortgage company would periodically require an inspection and would send a third part inspector for which they billed me half the fee. It was roughly $40 a visit, but it was the principle.

    Long story short, I received a second settlement. Rather than paying endless games with the mortgage company, I sold some stock in a brokerage account and used it along with the settlement check to pay off the mortgage company and get out from under their thumb when it came to repairing my house post hurricane.

  17. Hi Sam,

    Thanks for sharing your perspective and appreciate another great post. I can definitely see how the hidden costs of homeownership beyond the mortgage can quickly diminish any initial dopamine spike that you get from paying off the mortgage.

    For my wife and I, we paid off our $1.2M mortgage in NY in 2018 where we had a monthly payment of $5,186 based on a 30-year fixed mortgage rate of 3.75%. At the time, we were elated because it would allow us to save more and allocate more funds to our brokerage account. With elevated inflation over the last two years, I appreciate it even more today! Higher homeownership costs and higher cost of living in general due to inflation is difficult in itself. As an FYI, our common charges increased by 10% y/y and our property taxes increased by 20%. In some areas in NYC, property taxes went up by 40%! If we still had a mortgage, it would have been even more stressful.

    Cheers,

    Harvey

  18. Ms. Conviviality

    It’s been 9 years since we’ve paid off the mortgage on our primary home. I remember being elated when we made the last mortgage payment and went out to dinner to celebrate. I don’t recall that happiness lasting beyond that day. However, since then, there have been numerous occasions that we remind each other how grateful we are to not have a mortgage when times get tough.

    When we found our most recent investment property, we decided that we wanted to have the property paid off in 5 years so that we could retire early. We only have 2.5 years to go and it feels great to know that we are putting our money towards a guaranteed income source.

  19. My wife and I inherited 3 properties after my mom-in-law passed away, the one we currently live in, my mom-in-laws house and a beach vacation rental she also owned. We feel very fortunate, but the dark side is that along with these properties comes a lot of maintenance and upkeep we cant afford….could never afford. Makes one consider selling the rental properties if the funds are not there for major repairs. The income is good, but again major upkeep is needed in the tens of thousands of dollars which is a BIG stretch.

  20. We paid off our mortgage in 2020 and had no regrets. Increased cash flow has been deployed to building passive income via CD’s, Ibonds, and dividend funds plus virtually eliminating fears about losing our home. What a weight off our shoulders! Thanks, I have enjoyed FS for years!

  21. Our house is long since paid off. I realize that the equity in it could have been invested at much better rates than what I am not paying on a home loan (at least on average, over time) but goshdarnit, I try to keep life simple and that, plus a large decrease in worry, just seems worth the loss in potential earnings. Heresy, I know.

  22. Sam, first off want to say love your posts and regularly look forward to them.

    One thing I wanted to point out that may be specific to my locality that motivated me to pay off our house was the increasing cost of insurances. I live in SE FL and if you have a mortgage you’re required to carry “Wind Storm insurance for full replacement value of the property and dwelling. The 30-50% they keep raising it is what motivated me to pay off the bank and just have liability, fire and the other basics. Saved 12k a year and at the time the underwriter said “yours only will go up 30%” like I was supposed the be excited about it.

    1. Great perspective, Jordan! I didn’t think about this scenario. Thank you for sharing. I’ll have to look into this if and when I buy a house in Hawaii near or on the beach.

  23. Timely article. My wife and I (both mid-30s with 2 young children) just paid off our house last month (bought it for 354k, 20% down, 3.49% 30 year fixed back in 2016, now worth approximately 530k). After leaving the bank, I remarked that it was anti-climatic. She asked what was I expecting? I said, “I am not sure. Maybe it will hit when we get the payoff letter or next month when the mortgage payment does not come out on the first.” Both of those have since come and went. I have a love hate relationship with real estate. I absolutely hate the upkeep/maintenance, but do love a paid-for physical asset that provides shelter for our family in case something would ever happy to me (sole provider). We do not have investing FOMO as we still continued to invest 15-20% of our income during this process and would just chunk anything left over/extra on the house.

    1. Yes, anti-climatic. Maybe if the lender threw borrowers a party or gave us a nice gift, that would help, hah.

      Actually, to make paint of the house, more meaningful, it’s worth throwing a party or getting each other gifts to commemorate. Make it real!

      1. All In The Family Season 5, 1974, Archie and Edith threw a mortgage burning party when the last payment was made!

  24. John Bennett

    We paid off our mortgage in February. We found that we deferred so much spending in our quest to be debt free, we still are spending all of our mortgage payment fixing deferred maintenance as well as replacing needs and wants that have been gathering over the last 18 months.

  25. My thoughts on this subject have changed over the years. I’m a risk adverse person overall I’d say. We bought our first house, a fixer upper with a 15 year that would have been paid off at age 40. Wasn’t a great house and the area wasn’t the dream life I had in mind. However, I was adamant on the importance of paying off our mortgage as soon as possible. With 8ish years left on that mortgage, we decided to move to a better to us state and buy a dream long term house. For this house we have a 30 yr at 2.75% after a covid refi. Now I feel like it’s better to ride the low interest rate and invest the difference. However, I am still a firm believer in having a paid off house before entering retirement from a risk standpoint. At age 40, we will start paying extra to treat it like a 15 year mortgage. I want out at 55.

    I will say this website had a huge impact on our lives. The number one take away I took from this website is your primary residence is just neutral real estate and not owning a house is short. So when we sold and moved, I didn’t mess around. I didn’t want to be short. We bought quickly in the new state specifically from the beliefs I formed from reading this site. If we would have waited, we would have been priced out. My life would not be as amazing as it now so thank you!

    1. Great to hear Josh! There is no better feedback I can receive than yours. So thank you for saying so. It fires me up to keep on going.

      I do like how you’re treating your 30 year mortgage as a 15 year mortgage. Do you have a lower rate, but you’ll pay it off sooner. That’s what I did basically for two mortgages.

      Good luck!

  26. For full disclosure, I have not actually paid off my mortgage nor have I ever put extra payments towards the balance. My interest rate is 2.75% on a 30 year fixed and my three rental properties are at 2.9%, 30 year fixed. Although it would reduced my financial stress the most, I have not done so because of your point #3. Although I have the cash savings to pay off the mortgage in full, I actually have it in T-bills and CDs earning over 5% relatively risk free. So, I am “living for free” and that feels great.

    However, for those who have semi/passive income streams that cover living expenses, once you pay off the mortgage on your primary (and increase additional cash flow), you will likely feel much better about saying sayonara to your employer once and for all.

    For those who have been putting extra payments towards paying off a mortgage but now decide it is no longer in their best financial interests to continue to do so, there is a way to increase cash flow without completely paying the mortgage…you can “recast” the mortgage.

    Thanks for another thought provoking article.

    1. Recasting is better than refinancing. Recasting only costs $300.
      What a great idea that nobody suggests!!!

  27. We paid off our primary about 3 years ago and I don’t regret it one bit. While I no longer feel joyful, I do feel peaceful and more secure. I did not want to retire with a mortgage (or any debt) since it would just require you to save more to cover it. I focus on keeping my expenses low and saving. We have 4 SFH rentals and paid cash for each and we plan to scale up to 7 and continue to pay cash. It is nice not having to worry about interest rates and loan closing costs plus the extra hassle. Yes, I could have leveraged up and bought more, but it is MUCH easier to manage 4 than 10 so this works for us. By the time we get to 7, we will be retired and have more time to manage them. Note: We do live in a lower cost city in the Northeast which helps to make this possible and are less than 5 years from retirement.

    1. Sounds like a good plan. Do you have a property manager? My limit is for a rental properties some thing as always up so I can’t own more. I also have reached the limit for how much I want to pay in property taxes each year. ($100,000). Anymore just feels uncomfortable.

  28. California Expat

    About two years ago I refinanced my home mortgage to a 30 year fixed at 2.625% and don’t plan on paying a dollar of principal early. The mortgage is just too valuable and frees up so much capital for other investments, and 2.625 isn’t a high hurdle to beat to make it worthwhile.

    Sam, I am curious about your optimism about San Francisco real estate. Would love to hear you address the homelessness, crime, rampant open drug use, and lack of will by local politicians to enforce criminal and property statutes, and how you factor that into your analysis.

    1. Where did you go to? And did you used to live in San Francisco?

      What’s interesting is that depending on the type of media you consume, San Francisco sounds terrible. But it’s usually the same old neighborhood and streets that get highlighted over and over again to make it seem like it is all of San Francisco.

      I expect the rhetoric to get even louder with the presidential election. And the people who left because they cannot comfortably afford to live here can also be vociferous. It’s fascinating actually.

      The artificial intelligence boom is here, and only going to grow. Couple that with big tech up about 50% here today, and the San Francisco Bay area real estate market is picking up again. I’m looking to buy.

      1. California Expat

        Thanks for sharing your views, SF is certainly getting a bad rap in the news. I went LA to S Florida, having the same issues as one of the other posts regarding soaring cost of home insurance.

  29. We paid off our home when I was 38 and I’m 43 now. There isn’t a day that goes by that I don’t feel grateful that we paid off the mortgage. I love knowing that if my husband or I lose our jobs we won’t lose the house. Yes, we still have to pay taxes but the amount is nominal compared to our old mortgage. In the time since we paid off our mortgage, we’ve bought a rental property in cash, maxed out retirement accounts, saved for college and paid cash for remodeling our home top to bottom. I would do it all over again! Paying off our mortgage was one of the best financial and life decisions we’ve made.

    1. That’s great to hear! Paying off your home in five years is very quick. Well done.

      Perhaps the greater the impact on your cash flow, and overall net worth in paying off your home, the more joy and peace, one will feel.

  30. Reasons #3 and #5 are very valid and I can absolutely relate to #4, but #1 and #2 will be there regardless of whether the house is paid off or not! My plan is to buy my personal home in all cash unless ZIRP comes back. Personally, my peace of mind is priceless!

  31. Great article, Sam. I’ve taken a somewhat backwards approach on my properties. I’ve paid off two of my 3 single family rental homes, and I’m currently expediting payoff of the 3rd one (I owe 49k) and the mortgage should be satisfied in December 2023.
    I also own a small commercial building that my business partner and I bought through an LLC, in January 2007. Unfortunately, he passed during Covid in the Fall of 2021. He and I had established life insurance on eachother, and so even with a pretty rough 6-8 months post his passing, I was fortunate enough to work with his heirs to retain the building and LLC solely, and even pay down the mortgage on our building with remaining life insurance funds. Ultimately, I now am the sole owner, with a remaining mortgage balance of $37,000 on my office building. I plan to pay this property off by October 2024.
    I mention this, because I will have (technically) 4 rental properties without a mortgage by October next year (the commercial building is in an LLC that I rent back to my self for my insurance business). Yet, I have balance on my home mortgage.
    My principal residence (forever home) has a balance of 447k at 2.5% 30 year fixed. Even with the small mortgage tax deductions that I’ve eliminated on my rental properties, the rental income feels like I live for free in my principal residence, as it more than pays for my mortgage and utilities.
    With 2 daughters in college this fall, and a third in Highschool, I’ve been able to use 529 money and pay cash for their education thus far. Ultimately, I would like to reallocate the dollars I’ve used to expedite the payoff of my rentals, to boost my savings. Currently we have about 350k in CDs and another 100k in liquid accounts. As long as I can get 4-5% rates on savings accounts, I’d just as soon put my extra cash into high (5%) interest rate accounts and utilize rent income to make my house payment each month.

    1. I hear you on feeling like you’re living for free after paying off your rental properties as it is used to cover+ your primary.

      Those mortgage amounts are small, and I think they are worth paying off too. Each feels like a nice win.

      The boost and cash flow feels great. But here’s something to think about. The Happier are you are about the boost and cash flow, perhaps the less financially secure you felt before.

      I’ve discovered the rapid fade of joy after paying off my latest rental meant the extra cash flow didn’t make much of a difference for financial security.

      1. Funny you mention the diminishing degree of happiness after paying off a property. I honestly don’t think I’ve given much (any) thought about not having that extra mortgage payment since I paid each house off. Perhaps I’ll feel different once the 3rd SFH mortgage is satisfied and I no longer have a physical mortgage statement other than my principal residence (my building is direct withdrawl and so I never really notice it).
        I hope it feels great for years and years, to have them paid off. Knowing myself, I’ll bet the euphoria will be gone much sooner!

  32. Retired Agent

    We used an ARM for our mortgage and made a goal of paying off our home by age fifty. We missed that goal by one year and have never regretted paying off our home. Our mortgage was our only debt. The mortgage money started going to our brokerage account. My advice on life insurance is to always use a term life product for coverage. My only exception is if you need long term care coverage then use a guaranteed premium whole life policy with a long term care rider. I am age seventy-one and no longer have any life insurance or long term care coverage. We have enough wealth that we care afford to pay for long term care.

      1. Retired Agent

        Everything fades with time the good and the bad. After twenty years of no mortgage I still enjoy having other uses for the mortgage payment.

  33. I always laugh when someone says something akin to “you have a paid-off house and no one can take it from you.” Yeah, try not paying your taxes and tell me you own your house. Homeownership is often best for the government, so hence why it is heavily encouraged and subsidized.

  34. We started with a 30-year mortgage and refinanced to a 15-year mortgage after 5 years. Next year we will pay off the mortgage after 20 years, having saved 10 years of interest payments. Our mortgage P&I is almost 100K per year so while joy may be fleeting, I believe peace of mind and satisfaction after making 20 years of payments will last for quite some time.

      1. Paper Tiger

        Will do. Three months after paying it off will be around March 2025. I hope you and I are still around ;)

  35. Dave Stutzman

    HI FS,

    I opened a Fundrise acct a year ago put in $1000 to see how it would go based on reading about you. It is down to $950 after a year? Is this really a good investment? I’m hesitant to put in any more money.

    Thanks,

  36. I’m close to paying off my mortgage. I plan to do it in about 12 months, which would be accelerated by a few years with extra principal pay downs. I have’t regretted paying down extra principal at all so far. And actually feel relief each time I do.

    After I get the mortgage done and dusted, I’m going to use my “excess” funds towards accelerating my retirement savings. I’m trying to hit a $1 million target and not having a mortgage payment will help a lot. I don’t plan to stop saving after I get there, but I will definitely breathe a big sigh of relief. Ultimately I want to reach $3 million before I reach age 65, or even 60 if I really focus. Great article, thanks!

  37. I paid off our rental condo and regret it. I should have kept the mortgage. The interest would help with tax deductions. The extra income is nice, but we have to pay more taxes. It doesn’t make me feel any better to pay off the mortgage. Lesson learned. Having a mortgage doesn’t matter to me.

    1. I never understood the tax deduction reason. Would you rather pay $100 in interest or $30 in taxes?

      If its the former, you can always get another mortgage loan.

    2. But let’s suppose that you pay $10,000 in interest in order to get a $2,400 tax deduction (just an example, assuming you’re in the 24% tax bracket, and that you have a fairly large mortgage balance). Is that really giving you much of a benefit? You’re still paying $7,600 in interest (using this example), after subtracting the tax deduction. That’s money that you wouldn’t have to pay if the mortgage were paid off.

  38. Great discussion questions! Here are my answers to a couple of them:

    Question: “If you’ve paid off your primary residence, how long did the joy last?”

    My wife and I paid off our mortgage about four years ago, and I would say that the joy didn’t last a long time, but the peace of mind did. I still have much greater peace of mind (or lower stress, to put it another way) knowing that we will never again have a monthly mortgage payment — unless we move again and buy a more expensive house, which is unlikely.

    The fact that we have ongoing property tax and maintenance expenses doesn’t really change things for me, because those expenses would be there whether we are paying a mortgage or not. Housing is never free, but it’s a LOT cheaper now than it was before we paid off the mortgage.

    Question: “Does anybody regret having a tremendous amount of capital locked up in one’s home? Being house rich but cash poor can be stressful.”

    Sometimes I do regret that a bit, but when I think about it, I really don’t. We have had difficulties with building up our short-term savings after paying off the mortgage, and so yes, it sometimes seems like it would be nice to have an additional $25k or $50k in the bank, instead of having the mortgage paid off. But then we would still have a monthly mortgage payment, and it would be even harder to make our savings go up rather than down. So overall, I’m happy that the mortgage is paid off. (Also, we live in a rural area with cheaper housing, so the amount of capital that is “locked up” in our house is probably much less tremendous than it would be for many people.)

  39. I think it makes sense to pay down your primary residence mortgage to the point that the monthly principal and interest payment is inconsequential in relation to the ongoing maintenance and taxes of the property, your income, and net worth. For example my principal and interest payment is about 50% of my monthly property tax bill and I have 85% equity in my home. I don’t think that paying it off completely would make a difference in my level of ‘joy’ regarding this topic

  40. Hi Sam! I am older than you and different place in life. I can see where you would keep your mortgage in this environment. Our daughter and son in law did the same. It makes sense. In our case, we wanted to be debt free before retirement. We were in the generation that transitioned from pensions to 401ks and there wasn’t the education there is now (or the internet). It took me a long time to learn. So paying off our mortgage before retirement helped us. It has been 4 years now and we are still glad we paid it off. We will need less investments in retirement since we won’t have the mortgage expense. You are right about the property taxes, though. We used the $$ from no mortgage payments to beef up our Roth IRAs. We are just regular middle class folks. Your article today was good, I enjoyed reading it.

      1. That is what we did. Most of the research I have seen shows that the highest cost you face in retirement is housing. Paying off a mortgage makes sense to keep those costs to a minimum.

  41. I was desperate for Passive RE income that would provide a sense of financial freedom, so I paid off investment properties before buying more. That felt good, like no bank could take them away. In hindsight, big mistake. Had I bought more properties instead I would probably have doubled my net worth. But my friend Hindsight is a party pooper so I’ve stopped inviting him into my head and now I feel happier about my investment decisions. Regarding my personal residence, 5 re-fis (no cost )later I’m at 2.25% and why in the world would I pay that down ? That would make me very unhappy. Like Sam says, my bank accounts earn over 4%, and as inflation continues my mortgage gets “smaller” every year so I’m happy to be currently winning the eternal me-vs-big-banks thumb wrestling match.

  42. Paying off our primary home was an easy financial decision, despite the alternatives that you cited. I sleep very easy knowing that most peoples largest expense is not something my family needs to be concerned about, whether I am alive or if I pass unexpectedly. It also makes me less indebted to my employer – now I’m willing to walk away (or be let go!) with very little heartache or consideration.

    One question for you Sam. And I ask this as a guy who lives in the central Core of Austin….how do you (we) reconcile living in places like SF or AUS given these issues: “Then when I read about corruption at the San Francisco Department of Building Inspection and the city wanting to fine homeowners for putting up tiny library houses, I get annoyed. There are bigger issues the city should be focusing on.”

    Austin wastes tax dollars on plenty of stuff that I do not agree with nor support. I watch the City pissing tax dollars away, while defunding police and crime spirals out of control. Tent cities spring up on waterfront real estate. We get very little from City services (taxes don’t pay for utilities or trash – those cost market rates anyway). Instead we get diminished police presence, underfunded fire, and under-staffed EMS.

    Despite having a paid off home in what most would consider a very desirable City, I’m counting the days when I can sell out and move to a rural suburb of Central Texas, where my property taxes will drop by 90% plus and I don’t have to deal or see the city fumble around with social issues and choo choo trains that service almost nobody.

  43. Excellent post! Yes, all the circumstances have to be looked at. My Dad passed at age 55 of a sudden heart attack. He smoked. It was 3 weeks before I graduated college and I had a brother in high school. Thank God he had life insurance through work. Though, that is term. When you smoke, rates for life insurance are higher- for both term and whole. Earlier, I had asked him why not pay off the mortgage? He said the interest rate was below what he could earn in the bank. This was the mid 1980s. He was right. My Mom took his advice. 35 years later ,I am in the same house still following their wise advice. I never smoked. The smoking rate is 13% down from 40%.We need to get people into good habits- the earlier, the better. Maybe kids should see what life insurance and didability policies ask so they keep healthy.

  44. Paying off our mortgage was the best thing we ever did. Fretting about interest rates is limited vision, in my opinion. The peace you have with that paid off mortgage is priceless, plus the additional cash flow can (and was) invested in the market. Worrying about mortgage interest rates is like playing games with credit card interest rates. Don’t think small – think big! Having cash allows you choices, which beats anything on a spreadsheet! Love your stuff! Keep up the good work!

    1. I don’t know about this answer. Cash NOT spent on paying down mortgage allows you to hold on to cash earlier which can be put to work on index funds which in turn beat real estate in the long term – for much longer (time in the market vs timing the market etc). If all your extra money goes to paying off your house, you will be much later to the game of gaingin market exposure which is the welath creator that drives the bus of plentiful retirement. Finally, on the stress of having a monthly payment on the house. If you mentally bunch your mortgage and tax bills and call it all taxes, you basically remove the “lack of peace of mind” piece, because taxes will always be there. And sub 3% interest is in a different universe than credit card interest. It is literally locked-in, free money over 30 year fixed mortgage terms. In other words – if you bought a house in the last 5 years, then 15 years down the line, when you still have a decade to go, your payment will be so small compared to other expenses in your life and you will have a retirement account that can easily pay the rest of your house off if you needed to.

  45. I used to think like this, especially when my ARM went from 3% to 2.67%, and was ok when it back to 3%. But now that it has gone up to 5%, I am looking to try to pay it off sooner. I should have refinanced in January 2021 instead of gloating that everyone I knew was refinancing and my rate was going down by paying nothing.

    1. Please do let me know whether the feeling you anticipate having paying off your mortgage matches or surpasses your expectations.

      After paying off two mortgages, the elevated satisfaction only lasted for 1-2 months. Then it was on to the next financial challenge.

      1. Totally agree with this. The joy of debt free lasted about 3 months. Then on to the next goal. Not complaining, but it’s not as fulfilling as I once thought.

        Maintenance doesn’t bother me, but continuing to pay rent to the government on property taxes reminds you that you never truly own anything. This can be even more frustrating when you “paid off” the house.

        I also have FOMO. If instead of paying off hundreds of thousands in debt, I could’ve invested it into a bull market that never seemed to end over the past 13 years. Different story now of course

      2. But this is less about the joy of ending the mortgage and more the specter of dramatically increasing ARM rates.

        You long espouses the virtues of slightly cheaper ARMs over fixed loans when ZIRP seemed eternal. But now we see a slight repeat of 2007 resets. When 30s were under 3%, the downside for ARMs seemed so much greater than the upside unless you had the means to payoff if the situation changed markedly, which is how it seems for the poster you just replied to.

        1. I’m still enjoying my 2.125%, 7/1 ARM I took out in 2020. 0.5-0.625% cheaper than the cheapest 30-year. But getting a 30 year fixed for under 3% is great too.

          I have no worries about paying my mortgage in 2027, if I still own my home.

          1. Thanks all for the comments back on myself lamenting my ARM. i don’t think I lament my ARM as much as I do not refinancing into a 30 year in Jan 2021. But who knows, interest may drop. (I just saw Sam’s latest post on No Regrets Getting An ARM Despite Higher Mortgage Rates

Leave a Comment

Your email address will not be published. Required fields are marked *