Why I’m Not Killing Our Mortgage

Not killing mortgageWhen everybody found out that we bought our first house a few months ago, I got a lot of people assuming that I was going to kill our mortgage as fast as possible. Paying off your mortgage early seems to be a pretty common goal among personal finance bloggers, so I wasn’t really surprised.

But I have absolutely no intentions of paying down our mortgage and that’s okay with me. This is our first house and neither of us plans to stay here forever. How many people retire in their first house? Now hold on, I’m not saying that I plan to keep upgrading over the years or anything like that.

It’s just not the house we see ourselves in long-term. If we end up staying the US, we both would prefer to have a few acres. Our current house is under an acre and smack dab in the middle of a neighborhood, not exactly secluded and private.

If on the other hand we ended up moving to another country, we might decide to live in the city. It all depends on the area and what it offers, but we still might opt for some privacy.

Either way, we don’t plan to stay in our first house for the long haul. So why should we kill our mortgage when we could use that money in other areas? With my luck, I would pay extra and end up needing to borrow money because something came up. Not my idea of a good time.

It wouldn’t be smart for us to do. I know that financially it might be smarter because more money would be applied to the principal, saving us interest and building equity faster. But it would put all of our other financial goals on the back burner (like paying cash for a second car later this year).

Our interest rate isn’t crazy awful either, it’s 3.75%. Compared to a few years ago, that’s pretty nice. So we’re not paying as much when you think of it that way. Even if we had the extra money to pay off our mortgage early and still meet our financial goals, I would much rather invest that money.

I don’t really (at least at this time anyway) see our mortgage as debt. We’re still a little ways from breaking even, but after that it’s smooth sailing. Well, unless our house drops in value and we end up underwater. In that case, it would probably just make more sense to wait it out and sell when the value goes back up.

Now, when we do find the house that we want to stay in forever…that’s a different story. Finances permitting, I would love to kill that mortgage as soon as possible. It would be nice to not have to worry about monthly mortgage payments.

What factors determined whether or not you paid off your mortgage early? 


Image Credit: http://www.flickr.com/photos/68751915@N05/6808984167/

About Jen Perkins

Likes: saving money, being debt free (aside from our house), zombies, travel, getting money, blogging and dogs. Dislikes: debt, being broke, bunnies, wasting money, not having enough money to travel the world and paying interest. Facebook  ♥  Twitter  ♥  Google+  ♥  RSS


Why I’m Not Killing Our Mortgage — 40 Comments

  1. Great reasoning for not paying off your mortgage early. I had been paying mine down early so that I could get rid of my PMI. But now that it is a rental and someone else is paying my mortgage for me, I don’t pay any extra.
    Jon @ MoneySmartGuides recently posted..Hidden InflationMy Profile

  2. It almost NEVER makes sense to pay down a mortgage early based entirely on the fact that INFLATION decreases the value of your loan over time.

    Seeing as your rate is excellent, you are entirely better off investing any extras. There are some buy and hold companies out there (yes they still exist) that pay more yield than you’re paying in interest.

    If your idea of investing is your mattress then you’re better off paying down the mortgage. If your idea of investing is savings accounts and CDs, you’re better off paying down the mortgage. Even if you think mutual funds are the way to go (they almost never are) then you’re better off paying down the mortgage. If however you’re a savvy DIY retail investor, then you can buy some lovely stuff that pays more than your mortgage costs you in interest and not lose a wink of sleep.

    If I had a mortgage, I would NEVER make an extra payment. My money is better put to work in my investment portfolio.
    thestarvingartistcanada recently posted..FOOD: pizza sauceMy Profile

  3. I am in the same boat as you Jen. I never planned on killing my mortgage because I would rather invest that money. One of my investment accounts is generating around 8% returns. That is more than my interest rate on my mortgage, so I feel that I made the right decision. I might do it when we move into our next home, one that we plan to live in for quite some time.
    Grayson @ Debt Roundup recently posted..Dang it! I Fought My Emotions and They WonMy Profile

  4. I always thought I would have a mortgage forever. I changed my mind as I get close to retirement (again). When I reached financial independence (retired) I liked the idea of a mortgage because I earned more on the money than I paid in interest. As I get older I want to simplify my life which means no debt (including mortgage)and flexibility in earnings.
    krantcents recently posted..Writing your will without a lawyer: Is it possible?My Profile

  5. The question would be, what would happen if there was another housing collapse and you had to sell in the middle of it? We are having to sell much sooner than we ever thought possible and are taking a huge hit.
    In fact, the buyer may be backing out, because he wants a $4,500 price drop based on the results of the inspection. We can’t do that, it would put the sale price under what we owe! Even though most of the things he’s upset about aren’t even real problems. Hello, didn’t you notice the lack of gutters when you saw the place?
    Edward Antrobus recently posted..Cell Phone Tethering for Free WifiMy Profile

  6. I guess all life situations are different and everyone has a different perspective on this. My wife and I are aggressively paying off our mortgage with the goal of being done this year. For us its simple – we have been convicted that we do not want to live with debt any longer. I’m greatly looking forward to being debt free and moving aggressively into the wealth building and giving stages of our lives.
    Brian @ Luke1428 recently posted..Reading Worth Your Time (1/26/13)My Profile

  7. Hey Jen,
    We’ve been in our house coming up 4 years this May and we’ve had the cash to pay it since December last year in full. It’s just a process to get it sorted now and we will do that this year. We wanted to fire it off because we wanted to start focusing on other things like retirement, investing,travelling. It takes the edge off worrying about potential injury, inability to work, loss of job etc for us.It’s also an amazing feeling every day knowing it’s gone. We never know what will happen and this is our way of protecting the roof over our heads. It’s personal at the end really as some people don’t want to pay it off.
    Canadian Budget Binder recently posted..Emigrating to Canada ~ Should I Rent Out My HouseMy Profile

  8. I am about to not have a mortgage anymore. I live in Australia and our interest rates are higher than yours, so we did pay down as much as we could.

    When I buy again, it will most likely be an investment property because here you get so many tax advantages on investment properties, but nothing on the home you own. I still wouldn’t pay it down any faster, but if I were to buy a home for myself again, I am hoping to do it with cash instead of dealing with a mortgage at all.
    Kylie Ofiu recently posted..How to get money fast without a loanMy Profile

  9. Yea, I *just* closed on my Condo but I’m not over paying monthly either. I think that based on the paltry 3.375% they signed me up for it sets a really low bar to beat with my investments. Plus, I would eventually like to rent this place out and in terms of buying another place, over paying doesn’t do you any favors in that area. You need to save for a down payment and building equity is great but doesn’t help with your down payment.
    Andrew @ Listen Money Matters recently posted..How I Save a Ton on Travel ExpensesMy Profile

  10. Glad to see somebody thinks like me. I didn’t pay the mortgage of my first house either and thank God I didn’t because a couple of years later me and my family moved to a better house and we’re loving it here. People shouldn’t be too quick when making these kinds of decisions.

  11. I have to agree with KrantCents. I’m closer to when I want to retire. We’re in the process of refinancing from a 4.25% 15 year note down to a 3.125% 15 year note. We also plan on using a combination of paying that down according to the original schedule, and putting more money into savings.
    I don’t care to have a mortgage in retirement and neither does my wife. But of course it’s an individual choice. :-)
    Chris recently posted..Refinance revisitedMy Profile