In less than three months, we will pay off our mortgage. Twenty years early.
This has been the moment I’ve been dreaming of for as long as I’ve been a blogger Or at least for as long as I’ve been a blogger who realized her mortgage was actually debt. Oof.
Why, then, am I not constantly radiating excitement at the thought? I ask myself that question constantly. Without a doubt, mortgage freedom is still our immediate financial goal. We are in agreement as a couple, and we’ve even started trying to get our preschooler in on the excitement. The baby just smiles no matter what. So why the hesitation then?
As far as I can tell there are three separate things that are giving me pause on the early mortgage payoff plan.
The (Second) Biggest Payment Ever
The first reason that is giving me pause is the dollar amount that is going to move from our savings to our mortgage account. Our final payment will likely clock in at around $30,000. The only payment I’ve ever made that was bigger was when I wrote out the check for a down payment on our house for a heart stopping $70,000 (I was only 26!).
Why does $30k bother me? It’s not like we don’t have the money. We do! But it is a little unnerving to think about that cash suddenly not being there anymore.
To push past this worry, I remind myself that we still have an emergency fund. Plus, we both have teaching contracts that will carry us through the school year. In theory anyway. So income isn’t an issue, and neither is savings.
The Most Common Advice
I’ve been in the personal finance world long enough to see the tides change over and over again regarding mortgages (and so many other things). Some years, the loudest voices want to be totally debt free. Other years, people yell at you on Twitter for suggesting you should pay off your mortgage. Guess which year we are currently in?
It’s true that the math suggests investing is a better idea than paying off a low-interest mortgage. But money is never just about math. Mentally and emotionally, I know that paying off our mortgage beats investing. Plus, it’s simply not my investing personality to drop a single lump sum of that size into our brokerage account.
I know I should, but I also know I won’t.
What I will do, though, is take what we aren’t paying toward our mortgage and move it to our 457 and 403b accounts. How can I be so sure? It’s what we did with our car payments and our Roth IRAs.
So I’m comfortable ignoring the loudest voices and the math in this case.
The Possibility of a Pivot
Why the hang up then?
We are having a school year like no other.
Again.
And while past me was pretty sure that I would not be typing some of the things that I am about to type and experiencing all of the things that I am experiencing, here we are. Again. We are in the middle of Pandemic School Year Three and all of the chaos that is spiraling out from it is once again forcing me to question whether or not I will have to take a leave.
So it’s one thing to look at your emergency fund and knowing that you can cover job loss down the road in some sort of imagined hypothetical scenario. It’s something totally different feeling like at any turn, you might actually have to have a gap in income not for something you did or didn’t do but because of a situation that is entirely out of your control.
I do think that we have done enough of a job of putting on our own parachutes as two teachers to two small children, but it does make me wonder if we should wait another school year.
Committing to a Mortgage Payoff Anyway
The reality is life doesn’t doesn’t wait. There’s no guarantee that next school year is going to be any different than this school year. There’s hope and optimism, of course, that it will be, but after the week that I just had, I don’t know how much of that there is left either.
So that means that we have to leap. It might feel like we are leaping without testing the strength of our net, but I have to believe that we have actually been strengthening it for years and years. We’ve made extra payments and we’ve built other income streams.
We have been putting together a net that we can rely on where even if this does deplete our cash reserves some, bucks traditional (and loud!) financial advice, and even if we do have to pivot in our careers temporarily or permanently.
We have this net so that means that we can take the leap and figure out what mortgage freedom actually feels like.
So Tell Me…Have you ever second-guessed a financial goal?
Penny, I know THIS WHOLE THING has been so hard for you, and you upped the difficulty level with a pregnancy and now Squish has joined the fun.
My question is, why the rush? You’re clearly not comfortable paying the extra $30k right now, but the monthly payments are easy-breezy. For you, I would keep the cash in savings, set the minimum monthly payments on cruise control, and sleep a little easier.
Good luck with your decisions. I know none of them are easy to make.
Hi Penny
I’ll tell you what. I’ve never regretted a financial decision that I’ve thought hard about. I’ve regretted a lot of capricious money moves, but never anything big. It sounds like you’ve thought this through a lot.
For us, going mortgage free actually feels like we have more opportunities to quit our jobs because our monthly expenses are so much lower. But our mortgage payment before we paid it off was massive.
I can’t wait to see what you decide!
Never. I’ve not second guessed much of anything in life. It reminds me too much of worrying about something you can’t change. We paid off our house early when the best loans were still 6%, that’s been a while. But we never regretted it. The vacation house we are building we are paying cash for. There is no situation that will ever cause me to borrow a dollar in the future, even at zero interest. Once the house was paid off we’ve never borrowed again, and never will. However for younger people like you, I don’t think there is a wrong choice. You are amazing with money, I think you are making one of two possible great choices, and you’ll really enjoy the feeling of truly owning your house. Congrats on being exceptional!
Can you do halfsies? Just some buffer and do another halfsies next year?
Given how high inflation is right now, TIPS (inflation adjusted savings bonds) make a lot of sense! They’re just as safe as mortgage prepayment (though you’re limited I think to 10K, so you wouldn’t be able to substitute the entire amount). We haven’t tried it but commenters on our blog recommend it.
Once we got near the end of our mortgage life, we stopped prepayiing because it just didn’t make much sense anymore. Mathematically we were saving almost no money (because there’s very little interest left), and from a risk perspective it didn’t make a ton of sense either because it wasn’t a large enough amount for us to be in big trouble if we had to move or any other risk scenario we could come up with. We had plenty of home equity already.
I know that seems backwards, when you’re close to paying it off, why not just pay it off and be done with it, but there just wasn’t that great a gain from doing so anymore. And figuring out property taxes was a bit of a bear. And by not pre-paying anymore we were learning a bit how to direct a portion of that extra cash flow without having it all at once (though by the end of our mortgage life, a much larger portion of our mortgage payment was property tax than had been before, so the actual cashflow from not having a mortgage anymore wasn’t as great as it could have been).
In retrospect, I wish we’d completely maxed out all of our retirement options instead of doing mortgage prepayment, because you don’t get that retirement space back just because you have a lot more money to keep each month from not paying + prepaying the mortgage.
We are happily in the payoff early column, and have 0 regret. You have sound reasoning for going mortgage free, even on one income you can do it. I know I sleep better (and I’m a teacher) having no debt of any kind. You’ve got this Penny, no matter what next year brings.