Yes, Pay Off Your Mortgage Early

I hear it all the time. 'Don't pay off your 6% mortgage! Invest in the market! Keep the tax deduction!' Let's do the math. To get a tax deduction, you have to spend money on interest. You are paying the bank $1 to save $0.25 in taxes. That is a losing trade every single time. Furthermore, a paid-off house is a 100% guaranteed return on investment equal to your interest rate. Where else are you getting a guaranteed, risk-free 6-7% return right now? Nowhere. Pay it off. Sleep better. The bank hates this advice.

1. The Tax Deduction Myth

The biggest lie about mortgages is the tax deduction. People will tell you that mortgage interest is "tax deductible," so you should keep your mortgage forever. Here's the reality: To get a tax deduction, you have to pay interest. If you pay $10,000 in interest and you're in the 25% tax bracket, you save $2,500 in taxes. But you still paid $10,000. You're paying $1 to save $0.25. That's a terrible trade. The tax deduction doesn't make mortgage interest free; it makes it slightly less expensive. You're still giving the bank money. A lot of money. Over 30 years on a $400,000 mortgage at 6%, you'll pay about $463,000 in interest. Even with tax deductions, you're still paying hundreds of thousands of dollars to the bank. The deduction doesn't change the math; it just makes people feel better about being in debt.

2. The Guaranteed Return Argument

Paying off your mortgage early gives you a guaranteed return equal to your interest rate. If your mortgage is 6%, paying it off early is like investing in a 6% guaranteed, risk-free bond. Where else can you get that? Nowhere. The stock market might average 10% over 30 years, but it's not guaranteed. It could be -20% this year and +15% next year. Your mortgage interest is guaranteed. Every dollar you pay toward principal saves you 6% (or whatever your rate is) in guaranteed interest. That's real money. That's money you don't have to earn, invest, or risk. It's just money you don't have to pay. Financial advisors will tell you to invest instead of paying off your mortgage because they make money when you invest. They don't make money when you pay off debt. Follow the money. The people telling you not to pay off your mortgage are the people who profit from you having a mortgage.

3. The Opportunity Cost Fallacy

The "opportunity cost" argument says that if you pay off your mortgage, you're missing out on potential investment returns. This assumes you'll actually invest the money instead of spending it. Most people won't. They'll spend it on cars, vacations, or stuff they don't need. Even if you do invest it, you're comparing a guaranteed 6% return (paying off mortgage) to a risky 10% return (investing). The risk-adjusted return on paying off your mortgage is often better. Plus, once your mortgage is paid off, you have your full mortgage payment available to invest every month. A $2,000 monthly mortgage payment invested for 20 years at 8% is worth about $1.1 million. You can have both: Pay off your mortgage early, then invest the payment. You don't have to choose one or the other forever.

4. The Psychological Benefits

Owning your home outright is freedom. You can't be foreclosed on. You can't lose your house if you lose your job. You can't be forced to move because you can't make the payment. That peace of mind is worth more than any potential investment return. When your house is paid off, you have lower monthly expenses. You need less income to survive. You can take risks in your career. You can start a business. You can retire early. You can say no to a bad job. Debt is a prison. A paid-off house is freedom. The bank wants you in debt forever. They want you to think you need their money. You don't. Pay it off and be free.

5. How to Pay Off Your Mortgage Early

The strategy is simple: Make extra principal payments. Every month, send your mortgage servicer an extra payment with instructions to apply it to principal. Even an extra $100 a month on a $300,000 mortgage at 6% will save you $47,000 in interest and pay off your mortgage 4 years early. If you can afford $500 extra a month, you'll save $120,000 in interest and pay it off 10 years early. The key is consistency. Don't wait for a windfall. Make it part of your monthly budget. Treat it like a bill. Set up automatic payments if you have to. The bank will try to make it hard. They'll hide the "make extra payment" option on their website. They'll try to talk you out of it. Ignore them. Send the money anyway. It's your money. Use it to pay off your debt.

6. The Bank's Perspective

Banks hate when people pay off mortgages early. Here's why: They make money on interest. If you pay off your mortgage in 15 years instead of 30, they lose 15 years of interest payments. On a $300,000 mortgage at 6%, that's about $150,000 in lost interest for them. That's why they'll try to talk you out of it. They'll send you letters about "investment opportunities." They'll offer you HELOCs to "unlock your equity." They'll tell you about tax deductions. They'll do anything to keep you in debt. Don't fall for it. The bank is not your friend. They're a business. Their business is making money from your debt. Your business should be getting out of debt. Pay off your mortgage. The bank will survive.

7. When It Might Make Sense to Keep a Mortgage

There is one scenario where keeping a mortgage might make sense: If you have a very low interest rate (like 3% or less) and you're confident you can invest the money at a higher return. But even then, you're taking risk. The stock market could crash. Your investments could lose value. Your mortgage interest is guaranteed. Most people don't have 3% mortgages. Most people have 6-7% mortgages. At those rates, paying it off early is almost always the right move. Don't let perfect be the enemy of good. If you have a 6% mortgage and you're not a sophisticated investor, pay it off. The guaranteed return is better than the risk.

8. The Math Doesn't Lie

Let's do the final math. You have a $400,000 mortgage at 6% for 30 years. Total interest paid: $463,000. If you pay an extra $500 a month, you'll pay it off in 18 years and save $200,000 in interest. That's $200,000 you don't have to earn, invest, or risk. It's just money you don't have to pay. The bank loses $200,000. You keep $200,000. The math is simple. Pay off your mortgage early. The people telling you not to are the people who profit from your debt. Don't listen to them. Listen to the math.