There are so many opinions on whether or not you should pay off your mortgage early. Some say that paying off your mortgage is a bad idea because you could make a lot more money in the stock market. With the incredible stock market returns over the past decade, there’s a lot of truth to that. And others appreciate the peace that comes with not owing anything to the bank each month. The benefits of a paid-off house are hard to deny as well.
So, what’s the right answer?
I’m not sure there is one. I think only YOU can decide what’s best for YOU.
At the start of our marriage, my wife and I decided to pay off our $500,000 home in less than 5 years. It was an aggressive decision and one that required a lot of partnership and dedication. But we did it … together. And we’re so glad we did.
That was a personal choice, and it was best for our family.
Top 15 Benefits of a Paid-Off House
If paying off your mortgage sounds interesting to you, here are 15 compelling benefits of a paid-off house.
Decreased Annual Living Expenses
According to the US Department of Labor, the largest expense in the typical American family’s household budget is their mortgage or rent. Imagine that being completely wiped from your annual expenses. What a weight off your shoulders!
That would leave you more money for fun, vacations, investing for the future, contributing to your kids’ college funds, and so much more.
Since our mortgage and extra principal payments were around 35% of our living expenses, we are breathing much easier with our mortgage gone.
Makes Saving for Retirement Easier
Before paying off our mortgage, our annual expenses were around $75,000 per year. With that type of lifestyle, we would need to save around $1,500,000 to retire comfortably using the 5 percent rule.
By removing our mortgage from the equation, our annual expenses got to around $60,000 per year. In theory, this means we would only need to save up to $1,200,000 for retirement to live a comfortable lifestyle.
Now there are a lot of factors that can throw that convenient math problem off (inflation, lifestyle change, etc), but when all is said and done, it’s going to be easier for us to retire. $300,000 easier!
Increased Savings Rate
With no house payment, we were able to save around 50% of our income. That was huge for us.
At the beginning of our marriage, we were living for today, spending what we wanted, and we were happy … until we realized we had a negative net worth. Yikes!
Having a large cushion of cash, built-up retirement accounts that have allowed us to achieve Coast FIRE and the ability to funnel more of our money toward income-producing assets also makes us feel happy … just in a different way.
Increased Net Worth
When you don’t have debt, you avoid the negative drain on your net worth. And without a mortgage, this is doubly true!
When we started our journey of financial betterment in 2010, we had a -$50,000 net worth. (Yes, that’s a negative symbol).
We owed A LOT more than we owned. I owed more on my home than it was worth, had $30,000 of student debt, and I was spending more than I was earning. I even bought my wife’s engagement ring with my student loans!
10 years later, our net worth grew to over $1,000,000 through simple investing strategies, increasing our income, and focused debt destruction. Without a mortgage, our net worth continued to soar.
(I track our net worth with a simple spreadsheet, but an awesome tool to automate the process is a free service called Empower.)
Have More Fun
My wife loves to do design projects in our home. I love vacations. With more available cash flow, we’ve been able to enjoy life and reward ourselves more lately.
Nicole has been able to update our laundry room, update our kitchen, buy new furniture guilt-free, and we even got the hot tub we always wanted. This home now feels like a palace, and it’s ours!
We’ve traveled a lot more as well. Disney World, Cabo San Lucas, Los Angeles, Ft. Lauderdale, Cancun and many trips to Northern Michigan have been some of our favorite destinations since paying off our mortgage.
Having the extra cash available has helped us travel without restriction. Getting out of town during our Michigan winters is now a must for this family.
Reduced Stress
I don’t know about you, but I got really stressed out about the size of my mortgage. Having such a large payment each month made me feel worried.
- “What if I lose my job and we’re not able to make the payments?!
- “Or what if I get a new boss and he’s a complete jerk, but I can’t leave because of the mortgage?!”
- “What if a recession rolls in and severely impacts our income?”
These were real recurring thoughts I had. And I couldn’t just tell myself to calm down or not think about it. (Believe me, I tried. The Calm meditation app has become a good friend of mine lately!)
When our $1,300 (w/o taxes and insurance) payment was gone, my stress level decreased dramatically.
Sure … There are still other bills we have to pay for the rest of our lives, but none will ever be as big as our mortgage.
Never Worry About Refinancing Your Mortgage
You know when the interest rates drop and all you hear is chatter about refinancing your mortgage? Well, when you don’t have a mortgage, you don’t even have to wrestle with the decision of whether you should refinance your mortgage or not.
That is one less decision you have to make for the rest of your life!
There are major benefits to reducing the number of decisions you need to make in your day. You’ll be more productive, your mind will feel clearer and life will feel easier.
Ownership Pride
The fact that Nicole and I own our home outright fills me with so much pride. The peace of mind that comes with true homeownership is incredible.
I’ve even found myself standing on my front lawn staring at my house and saying, “That’s our house. We own all of it. My kids will always have a place to call home.”
Those declarations are fun to say.
Design a New Lifestyle
I’ve had the chance to interview dozens of families on my podcast who have paid off their mortgages. One of the most impressive things I’ve learned about how mortgage freedom has changed things for them is their overall lifestyle design.
Many have gone from working full-time jobs to just part-time jobs. Now that they don’t need as much money to live, they don’t want to work as much. How cool is that!?!
Others completely changed career paths altogether. It’s as if they now had the confidence and financial cushion to make bolder lifestyle decisions. That’s what mortgage freedom did for them.
Like these folks, I made the choice to leave my corporate career and work part-time as a family finance coach and a full-time Dad. It's been a wild ride so far, but I'm loving it.
As for my wife, she left her 9-to-5 lifestyle to go back to school and become an esthetician. She's now working part-time too!
Not having a mortgage gave us the confidence to take those major lifestyle leaps. This is my favorite benefit of the 15 benefits of a paid-off house.
Easier Path to Financial Independence
With a paid-off mortgage, you don’t have to save as much money to reach financial independence. Your expenses are now significantly lower.
For example, if your family spends $84,000 to live each year and then pays off your mortgage with a $1,000 payment per month (principal and interest only), your new annual living expenses are only $72,000.
That means you only need to create $6,000 of monthly income to become financially independent.
How can you get there? Here are 3 of my favorite income-producing routes:
- Investing in a taxable brokerage account
- Two spouses working part-time at home
- Starting your own work-from-home solopreneur business
I’m not insinuating that people shouldn’t focus on these income routes before they’re mortgage-free. In fact, I’d highly recommend it!
Have a small business idea that allows you to follow your passion and provide for your family? Go for it!
Nicole and I have had a lot of trial and error to get where we are today. The knowledge we’ve gained from that trial and error has been priceless.
Of course, you don't want to just take our word for it. Over the years, I've heard dozens of stories of mortgage payoff journeys. So I thought I'd share five of my favorites and what they consider to be the benefits of a paid-off house.
11. Be More Charitable
Keith Robinson and his family are also mortgage-free. Living in California, they know a thing or two about the high costs of living. That's why Keith reframed his attitude. By “saying yes when others say no”, he was able to supercharge his income as a jail deputy.
He and his wife worked out a schedule that allowed him to accept as much overtime as possible. By clocking hundreds of hours of overtime and working hard, he snagged some promotions and doubled his income. All of this allowed the Robinson family to pay off their mortgage early.
One of the biggest benefits of a paid-off house from their perspective is that it allows them to be more charitable. They made giving a priority even when they were in debt. However, being mortgage-free means that they have even more money to support causes they care about.
To hear more about the Robinson's mortgage freedom journey, take a listen here.
Inspire Generational Wealth
Marriage Kids and Money is all about strengthening family trees. Did you know that paying off your mortgage does exactly that? Take the McCoy family for example.
To fast-track their debt-freedom journey, the McCoys started flipping houses. It became a family affair. One of their kids even tried to use their after-school visits to the home improvement stores as an excuse to dodge a homework assignment!
By involving the kids in the flipping process and also having them help color in mortgage payoff tracker boxes, the whole McCoy family really invested in the process. They started having conversations with their kids about what money means and the different trade-offs they could make.
Choosing to be debt-free sends a powerful message to kids. And as parents know, they're always watching and learning from us. Involving them in a financial milestone like a paid-off house can set the tone for how they view money later in life.
The McCoy's whole mortgage freedom story–including all their trips to Lowe's–is available here.
Dream Bigger
A friend and fellow blogger, Jessi Fearon, is also mortgage-free. She and her husband decided to completely pay off their home…and they did it on an income of less than $50,000 a year!
One mistake people make is thinking that if they don't have a big income, they can't tackle big debt. That's not the case! Of course, earning more money can make paying down debt easier. But if you're committed like the Fearon family was, it is possible to pay off your mortgage early.
This huge undertaking taught the Fearon family a lot of things. Learning to dream bigger is definitely one of the benefits of a paid-off house. The Fearon family knows that being mortgage-free will allow them to be more flexible with their spending. That means taking family trips now and tackling her husband's big dream of building a home from the ground up in the future.
Find out more about how the Fearon family paid off their mortgage early on an average income here.
Show Others a New Path
If you listen to Americans talk about money, the mention of a mortgage isn't far behind. For better or for worse, debt is part of our cultural narrative. The McNeely family takes issue with that.
The founders of His and Her Money set out to prove that an average couple could live a life without debt. That's exactly what motivated them to slash their mortgage as a single-income household. Once they developed this vision of debt-free living, they became laser-focused on the task. Tai would rearrange their budget or sell something, immediately sending that money to the mortgage. Even $20 here and $50 there helped chip away at the interest calculations. The amortization changes motivated them to push through any burnout they were feeling.
They are motivated to show not only their kids, friends, and family how life looks when you take a different path. They are also motivated to help as many people as possible imagine a different trajectory for themselves. Being mortgage-free allows them to live that example. It also allows them to work for themselves, growing their business to inspire others.
To check out the full scoop on how the McNeely family paid off a $330,000 mortgage in five years, click here.
Grow Rental Income Opportunities
Christina Marriott knows a thing or two about the benefits of a paid-off house. How come? She and her husband are working on paying off their third and fourth mortgages!
In addition to a primary residence, the Marriotts also have three rental properties. These rental properties are the key to their long-term plan. The rentals are a form of passive income for the Marriotts. They only invest in properties that net at least $1,000 a month. Currently, all of the cash flow is redirected into paying off the rental properties, which is how they've expanded the number of doors they own.
Of course, Christina also points out that as exciting as it is to own a rental property free and clear, there's nothing quite like paying off your primary residence. She says that feeling was actually the best.
When they are entirely mortgage debt-free, they will reconfigure the cash flow from their rentals. This cash flow will allow them to take one to two years to make some lifestyle upgrades. Christina has her eye on a new kitchen and knows that they both need to trade in their cars soon too. After that, they will use the cash flow to allow her husband to move to part-time work.
Find out more about Christina's journey to be mortgage-free on an almost half-a-million-dollar home in her 40s here.
Final Thoughts on the Benefits of a Paid-Off House
In the end, the plan to pay off our mortgage has worked out very well for our young family. Being mortgage-free at 35 was a family tree-changing moment for us.
Not everyone thinks these 15 benefits of a paid-off house are worth it. And that's okay! For some people, it makes more sense to prioritize other money goals. The important thing is that you find a path that works well for your family.
If you're inspired after reading through these benefits of a paid-off house, check out our mortgage payoff calculator to see how extra payments can accelerate your journey to complete debt freedom.
Carpe Diem Quote
“The goal isn’t more money. The goal is living life on your terms.”
Chris Brogan
What do you think of these benefits of a paid-off house? What would you add to the list?
Do you think paying off your mortgage early is not a good idea?
Please let us know in the comments below.
Leave a Reply