Should I Pay Off My House?

Many say purchasing a home is one of your biggest decisions, but few discuss the equally significant decision of paying it off.

There is a lot of disagreement on this topic, and individuals often find themselves lost and uncertain about what to do. The prevailing advice is that if you have extra money that can be invested or applied to eliminate your mortgage, you should invest that money if you can earn more than the interest rate on your mortgage. While mathematically this may be true, personal finance is more than just math, but also has a large behavioral component that frequently goes neglected.

At Incline Financial Planning, we believe the decision to pay off your home has a greater benefit to your well-being than the potential financial gain from investing that money We find that our clients who have paid off their homes experience:

- Reduced stress and anxiety
- Increased happiness
- Freedom
- Security

Knowing that the roof over your head is paid for is a feeling only those who experience it can extol. While the rhetoric that you can “earn more” by investing may be true, it neglects the fundamental reason we seek financial success in the first place. The belief that people want to be rich is often driven by the desire to attain the very feelings that having a paid-for home can provide. So why not achieve that directly?

When Should I Put Available Cash Towards My Mortgage Then?

Paying off your mortgage is one of the final steps in your financial journey. It's important to establish a strong financial base before taking this step. The following criteria should be met before you consider paying off your mortgage:

1. You are completely debt-free, with the only remaining debt being your home.
2. You have an emergency fund.
3. You are saving 15% of your gross income towards retirement (not including your employer match).
4. You are setting aside money for your children's college education.

Once you have accomplished all of the above, we recommend you tackle paying off your mortgage.

If you are on the fence and unsure if paying off your home is a wise financial move, ask around before you make a decision. Find people who have paid off their homes and ask if they regret the decision or if they would consider borrowing against their home to invest the difference. We have yet to find someone who has regretted paying off their home. Instead, they have found calm, happiness, freedom, and security. Isn't that what it's all about anyway?