The Truth About Paying Your Mortgage Off Early
Episode Summary:
Paying off your mortgage early is one of the most debated topics in personal finance and real estate investing. Is it smarter to be debt-free, or should you leverage your money to invest elsewhere? In this post, we’ll break down the key considerations, from interest rates to personal goals, and help you decide what’s best for your financial journey.
The Interest Rate: A Logical Starting Point
Your mortgage interest rate plays a huge role in determining whether paying off your mortgage early makes financial sense. Here’s why:
The rate of return on extra payments toward your mortgage equals your interest rate.
If your mortgage is at 4% or less, you can likely earn a higher return by investing your money elsewhere, like in the stock market or a high-yield savings account.
But if your mortgage rate is 7–9% or higher, paying it off could offer a guaranteed return that’s hard to beat.
Key Takeaway:
Mortgages with rates under 5% generally don’t need to be paid off early. Higher rates? It might be worth considering.
The Growth vs. Harvesting Phases
Your financial goals and stage of life matter just as much as the math.
Growth Phase: If you’re building wealth, good debt can amplify your returns. Focus on acquiring assets like rental properties or growing your stock portfolio.
Harvesting Phase: As you approach retirement or a phase where financial stability matters more than growth, paying off your mortgage can de-risk your portfolio and maximize cash flow.
Coach Chad Carson from The Small and Mighty Real Estate Investor sums it up best: In the growth phase, debt is an accelerant. In the harvesting phase, less debt equals peace of mind.
The Emotional Side of Debt
Financial decisions aren’t purely mathematical. They’re deeply personal. Paying off a mortgage can reduce stress, provide a sense of security, and improve your overall well-being. If paying down debt aligns with your values and gives you peace of mind, it’s worth prioritizing—even if it’s not the “optimized” financial choice.
Strategies to Consider
The Debt Snowball Method: Focus all your extra cash flow on one mortgage at a time. Once it’s paid off, use the freed-up cash flow to tackle the next one. This accelerates the process and builds momentum.
Sell to Simplify: If you have properties with significant equity, consider selling one to pay off multiple mortgages. This can fast-track your journey to financial freedom.
Assess the Trade-Off: Compare the potential cash flow unlocked by paying down a mortgage with other investment opportunities.
Closing Thoughts
There’s no one-size-fits-all answer to whether you should pay off your mortgage early. It depends on your interest rate, financial goals, and personal comfort with debt. Whether you choose to pay off your mortgage or use that money to invest, the key is making an intentional decision that aligns with your long-term vision.
Want to Take the Next Step in Your Real Estate Journey?
If this post resonated with you, let’s connect! Find me on Instagram @cashflowsaga to chat about your financial freedom goals—I’d love to help however I can.
Looking for more resources? Download my free investing tools or explore my 1:1 coaching program, Rental Property Investing 101, to fast-track your success.
Stay committed to the journey, my friend. Your future self will thank you! 🚀
