The advantages of having no mortgage are a hot topic of discussion in the personal finance community. Many people love the idea of being completely and wholeheartedly debt free – mortgage included. It’s said that you simply sleep better at night and that you haven’t truly lived until you are debt-free. Some in the community, however, think it makes more financial sense to carry mortgage debt and use any extra money to invest in the market. They say the math works out better in the long run. It largely boils down to personal preference and whether you believe the benefits outweigh the drawbacks.
Many people dream of owning their own home, and having no mortgage adds even more satisfaction. This article explores the benefits and drawbacks of being mortgage-free to help you determine if it’s the best financial decision for you.
The Allure of Mortgage Freedom
Imagine having no obligations and realizing that your house is entirely yours when you wake up one morning. The pure joy of being a home owner comes with no monthly mortgage payments or interest to accrue. It’s a powerful feeling that motivates many people to prioritize becoming mortgage-free.
Benefits of Ditching the Mortgage
The advantages of saying goodbye to your mortgage go beyond just emotional satisfaction. Here are some tangible benefits:
- Financial Freedom: Without a mortgage payment, you’ll have more disposable income each month. This can be used to boost your savings, invest in other areas, or simply enjoy a more comfortable lifestyle.
- No More Interest Payments: Interest payments can add up over time, significantly increasing the total cost of your home. Eliminating them can save you a substantial amount of money in the long run.
- Increased Equity: As you pay off your mortgage, you build equity in your home. This means the percentage of your home you own increases, making it easier to sell or refinance in the future.
- Psychological Benefits: Many people feel a sense of security and peace of mind knowing they are debt-free and own their home outright. This can lead to less stress and anxiety about finances.
The Other Side of the Coin: Potential Drawbacks
Although there are many alluring advantages to being mortgage-free, there may also be some drawbacks to take into account:
- Reduced Liquidity: When you pay off your mortgage, you’re essentially tying up a large sum of money in your home. This can limit your access to cash for other needs or investments.
- Missed Investment Opportunities: Depending on the current market, you may be able to earn a higher return by investing your money elsewhere rather than paying off your mortgage.
- Tax Implications: Mortgage interest payments are often tax-deductible, which can lower your taxable income. Paying off your mortgage eliminates this tax benefit.
- Prepayment Penalties: Some mortgages come with prepayment penalties, meaning you could be charged a fee if you pay off your loan early.
Making the Right Decision: Weighing Your Options
Ultimately the decision of whether or not to be mortgage-free is a personal one. There’s no one-size-fits-all answer, and the best choice for you will depend on your individual circumstances. Here are some factors to consider:
- Your financial goals: What are your short- and long-term financial goals? Do you prioritize saving for retirement, investing in other areas, or simply having more financial freedom?
- Your current financial situation: How much debt do you have? What is your income and expenses like? Do you have a solid emergency fund in place?
- The terms of your mortgage: What is your current interest rate? Are there any prepayment penalties associated with your loan?
- The current market conditions: What are interest rates like? What are the potential returns you could earn on other investments?
Seeking Expert Advice
If you’re unsure whether or not being mortgage-free is the right move for you, consider talking to a financial advisor. They can help you analyze your individual situation and make an informed decision based on your specific goals and circumstances.
Remember, there’s no right or wrong answer when it comes to being mortgage-free. The important thing is to weigh the pros and cons carefully and make the decision that’s best for you and your financial future.
The Benefits of Being Mortgage Free – What Do I Think?
Well, I think it all comes down to your personal comfort level with debt. I hate the feeling of debt and look forward to a life completely free of payments. However, I am not in a big rush to pay off my mortgage. It’s actually last on my list, after my husband’s medical school loans.
But, I thought it would be fun to hear from someone who *has* paid off his mortgage, who knows the benefits of being mortgage free firsthand. So, I’m very happy to welcome Andrew Daniels from the blog Family Money Plan below.
Andrew is a very good friend of mine. We’re in a mastermind group together and talk every week. He’s extremely hard-working, intelligent, and has a very sound understanding of personal finance. Therefore, I wasn’t surprised that in their 30s, he and his wife paid off their mortgage. They hustled. They saved. They killed it. And, the story is so inspirational that I had to share.
In addition, Andrew is a math nerd who has produced a comprehensive spreadsheet and strategy to assist others in paying off their mortgages more quickly. There are more details on that at the end of the post, but until then, here’s Andrew:
Best time to pay off your debt
We were in debt for a few years, but looking back, I believe it was the best time in my life to get out of it.
My kids were young, and we were in a new place. With young kids, your life is in upheaval so adding something like this to our lives felt easier. It felt right to focus our finances on this while fortifying our new family dynamic, though perhaps that was just the rose-colored glasses of hindsight.
Since being a new parent really does throw you to the wolves (wait, did I just compare babies to wolves? Yikes!) You get very little sleep, and time has this weird way of flying by and standing still. Therefore, setting a goal like this didn’t feel any different from everything else we were doing in our lives.
Before we go into this, there is a question that comes up, so I’ll address it here.
We didn’t go over our budget when we bought the house, which is one of the main reasons we were able to pay it off fast.
We were fortunate to have an honest banker who said, “I can approve you for an additional 200K, but I’m not sure how you’re going to feed your family at that price.” ”.
It’s a rare, and vey honest answer.
We were able to put down more money in our budget because we were able to limit our house spending.
Ok, let’s get into some of the things that we gave up.
This one everybody seems to find shocking. For the first 3 years we only used an emergency flip phone, which we shared as a family.
We didn’t text because you couldn’t even text on it—well, you could have, but it would have cost money.
We didn’t decide we should both have phones until we had to take our oldest child to the emergency room.
My wife and I are travelers at heart. It was the first thing we talked about the night we met. So for us to say, “No travel until the mortgage is gone” was a big one.
But let’s be honest. Traveling with young kids isn’t a lot of fun. Sure the flights might be free, but you aren’t traveling with your kids for their sake. You say it’s for them, but they aren’t going to remember it.
Ultimately, for a span of six years, our vacation consisted of spending a weekend at a hotel a few hours away in North Dakota, which was my parents’ treat. Not exactly the world traveling we would have liked. But we both agreed that it was worth the sacrifice.
(Side note: Since a kid’s definition of a vacation is “pool,” you can take them to the cheapest hotel in your area and they’ll enjoy the adventure. ).
We discovered that my daughter had numerous allergies around the time we began to pay down our mortgage (do you recall the earlier trip to the ER?)
This made restaurants almost impossible (one allergy was sesame seeds, and They. Are. Everywhere!)
This meant that we had to learn to cook for our growing family.
We searched for some great recipes online and started to replicate our favorite dishes. Items such as Olive Garden’s Fettuccine Alfredo and Papa John’s pizza sauce were among the many that we would frequently prepare at home.
We are very lucky to live around family. Whenever possible, the grandparents would take the kids so we didn’t have to pay for daycare that day.
It was a double win. They got to spend time with their grandkids and we didn’t have to pay for daycare. That could end up savings us $50 a day (seriously… daycare is expensive!).
Our cars are old. Not ancient, but old, I still drive a 2004 van that was worth $2000 when we got it.
Prior to that, we had a 2003 CR-V that was rusting out and a 1997 Civic that my wife had once driven to college.
I love new cars, but the cost was prohibitive for us at the time. Not to mention that they depreciate in value so quickly.
We were able to pay this off quickly in large part because we were not burdened with large car payments.
Yes, we were made fun of, and we still are—come on, it’s a 2004 van—it’s such an easy target. Indeed, it was difficult to see everyone driving around in more modern vehicles when your car is ten years old. But it was a short-term sacrifice for long-term gain. Looking back on it, I wouldn’t change anything.
This was more of a swap, but $20 every Friday for take out pizza wasn’t in our plans. Instead we used our bread maker to make bread dough and we made our own pizzas.
We built the house with one nice upgrade: geothermal heating. In essence, it uses latent heat from subterranean water to heat your home for a fraction of the cost of gas or electricity.
This is significant because we live in a place that has occasionally been colder than Mars (at the time of writing this, temperatures are threatening to drop to -53) and it meant that our utility bills were a third of what everyone else in the area was paying for heat (and cooling).
This isn’t so much of a cost cut, as it was a cost savings. I love my coffee, it’s hard for me not to have one on the go during the workday.
So I switched to bringing my coffee from home.
Then I took it a step further.
One day, I just decided to go from drinking a lot of cream and sugary coffee to drinking black coffee instead. I decided I would keep drinking it until I liked it. After a month it was all good.
3 Things I Learned After One Year of Living Mortgage Free
FAQ
Is it good to be mortgage free?
What age do most people pay off mortgage?
Is it better to have a mortgage or pay it off?
Is mortgage-free a good thing?
In an era where many families require two working parents to make ends meet, being mortgage-free has allowed us to move to a single-income family . Having my wife at home has saved us an extra $600-$800 monthly on daycare expenses. Our daughter is now in preschool, but we have the flexibility only to have her go half-days, four days a week.
Do you have regrets about becoming mortgage-free?
While that may be true, our family has zero regrets about our aggressive move to become mortgage-free. We were able to pay off our mortgage early a few months after our second child was born. Paying off our mortgage has given us the financial freedom to make changes in our lives to provide us with more space while spending time with our family.
Is being “free and clear” from a mortgage always beneficial?
As a homeowner, being “free and clear” from a mortgage might seem like the ideal situation. You don’t have a mortgage payment, and the home is 100% yours. But is being mortgage-free always beneficial? Is it something you should be aiming to achieve in the long run? Not necessarily.
What is it like to have a mortgage-free wife?
She also watches my nieces and nephews a few times a week, keeping her busy for the past few years. In an era where many families require two working parents to make ends meet, being mortgage-free has allowed us to move to a single-income family . Having my wife at home has saved us an extra $600-$800 monthly on daycare expenses.