About a month ago, we had a pretty lively discussion about whether or not you should pay off your mortgage early. A number of readers made great points on both sides of the debate. Since that time, I put together some thoughts on how to pay off your mortgage early for those that are interested in doing so. Today, I wanted to share some thoughts additional thoughts on the topic.
The source for these thoughts is a recent book called “The Frugal Millionaires, ” which profiles 70 anonymous millionaires and their thoughts about money. Interestingly, just like with our prior discussion here on FCN, there are ‘frugal millionaires’ on both sides of the fence. Here’s a taste of what they had to say…
Thoughts in favor of keeping your mortgage…
“When it comes to residences, mortgages can be a way for someone to save cash for investing and therefore possibly allow them to earn a higher rate of investment return than one is paying in mortgage interest.”
“If you can have money at a cheap rate then a mortgage is a great decision…”
“If the money is cheap, it can be smart to arbitrage the cost of the mortgage vs. the benefits of a tax deduction and market gains…”
“The US government tax system is set up to reward those who have mortgages…”
“If the government is going to pay you to own a home, why turn them down…”
Thoughts in favor of paying off your mortgage…
“If you want absolute peace of mind, don’t have any debt…”
“For many people the advantage of the ‘interest deduction’ is a myth perpetuated by by real estate agents, mortgage brokers, and even your friends…”
“Mortgages lose their interest rate deduction efficiency as they get older. This [is because] you are paying more principal towards the end of the loan…”
“Take opportunities to pay off a little of the capital on your mortgage whenever you can — even if it seems like an insignificant amount.”
“I prefer not to have one and say get rid of them as fast as you can. Debt will kill you.”
“There’s a great feeling in living in a home you own outright.”
What say you?
While I know that I number of you have weighed in on this already, I still thought it would be worth asking… As I’ve noted previously, we’re doing a bit of both. We’re paying down our mortgage ahead of schedule, but we’re not committing every last penny to the effort. Instead, we’re directing a sizable chunk of our ‘discretionary’ funds to our investment portfolio.