[USER]

Should we pay off our mortgage? We owe $274K and have a 3% mortgage. I am 59 and make ~200K/yr.

Husband is 60 and disabled–unable to work. We can easily afford the house payments. Are currently saving quite a bit from my salary.

I love my job and don’t want to retire. House is currently worth about $700k.

I have individual stocks worth just about as much as our mortgage.

Don’t really want to keep them–they are a legacy of early-career stock picking (when that was what all the cool kids did.) Been procrastinating selling for quite a while because of the effort and the big-ish tax hit.

I know it doesn’t make financial sense to pay off mortgage early. We have such a good deal with our mortgage. But paying it off is so tempting because of the finality, peace of mind, and sense of achievement.

Plus, using the money to pay off house somehow that makes it easier to think about selling the individual stocks.

Talk me off the ledge please

[Jordyn]

What if your house went up in flames? Happens more than you think. I would not pay off the house

[Linda]

As many others have said it’s not the optimal answer mathematically but not everything is about the math. Sometimes “buying” piece of mind is worth more to you.

I’m assuming you have well funded retirement accounts that you didn’t mention. I came here to give you one other option to think about.

I like this middle ground approach personally and this is what we do. I opened a separate after tax brokerage account earmarked for house payoff.

This way we can pay off what’s left on the mortgage at any time we want to, but after seeing how it’s grown, we haven’t done it yet.

At this point, we could pay it off and still have money left over, but I like having the flexibility.

[Burnett]

Paid ours off. Sense of achievement lasted about a year. Wish I still had the 3% mortgage and put the money in the market.

[Andy]

I don’t think you should. Having a mortgage is beneficial for your taxes.

If you just leave the 274k in a HYSA, you can earn 4% which is higher than your mortgage.

If you don’t need your money from stocks right away, you should probably sell it over the years due to marginal tax rate.

[Mia]

It’s not financially optimal when everything is going well, but the problem is that economic hits tend to come in waves: stocks tick down when the economy overall is contracting and job losses are more likely.

You’ll still have a mortgage payment due, but (temporarily at least) may not have the stock value to pay it off *or* the income to make payments.

So have to sell stocks in a dip just to make payments.

At the very least, make sure you have enough in a HYSA to last through an 18 month recovery period if needed. But to me at that point you may as well have it paid off.

I’m probably biased by having 2 parents lose homes and being a young new entrant to the work force is 2008.

When you’ve lived the 150% downside, it’s hard to vote for the theoretical 5% upside spread.

[Christopher]

I paid off a $350,000 mortgage at 4.2% back in 2019. If I had just tossed that in VOO, it’d be about $918,000 today (just 6 years later).

If you feel like having half a million extra dollars laying around is a burden, pay off the mortgage.

[Rick]

A paid off home is historically an illiquid low performing asset class. I can’t imagine anyone has those features as reasons to hold an investment.

But a paid off home is an expense reducer and, for some, an emotional support asset. But these are hyper personal both to your long term plan and emotional needs.

Do you need a paid off home to make your fi plans work? Do you plan to sell this home in the future anyways which would further make payoff less attractive?

Do you need the mortgage debt gone to feel better?

If you have a lot of NOs to the above, petal to the metal with retirement savings and enjoy the benefits of any remaining tax breaks.

[Matt]

No, it makes little sense to pay off such a low mortgage rate, when you can earn more on that money instead.

Redirect your individual stocks into index funds.

[Kerri]

Do you have other investments? What happens if you become unable to work? Do you have a contingency plan for that?

The answers to those questions would determine what I’d do

[Amanda]

Mathematically, it makes little financial sense in your situation that you’ve shared to pay it off. For many of reasons listed.

However, I also openly acknowledge the psychological side of having a paid for

Home. I’ve never ever met anyone who paid their home off early who said they regretted it, which fascinates me.

It sounds like you also understand that side of it too from your OP.

One of the neat things about personal finance is just that, it’s personal. So, if your top priority is getting debt gone, then yeah pay it off.

If your top priority is investment growth or retirement account growth, then don’t.

Point is there’s trade offs to each side and just have to decide what you wish to prioritize!

[Meenakshi]

What is the primary reason to pay off the mortgage? If it is peace of mind, then that is priceless.

Do you have enough money to pay off the mortgage and the capital gains tax on the stock sale?

Do you have enough savings and investments for your retirement?

[张扬]

Unless your home value represents less than 15% of your net worth, do not prepay on that low rate mortgage loan.

Your monthly mortgage payment is one of the few expenses in your life that will not increase with inflation, and to prepay it with dollars that would otherwise grow with inflation if invested properly (even in risk free vehicles right now) is something that you will probably regret–unless, as stated earlier, your mortgage balance represents a miniscule portion of your net worth.

[Michael]

You don’t mention any other retirement assets. Assuming you have other retirement assets and the individual stocks aren’t slated for retirement income, there’s no real issue with de-risking your life.

Is it mathematically optimal? No, but 60 isn’t always about optimal, sometimes it’s about protecting your base and sleeping well.

[Edna]

Pay it off in chunks- don’t sell all the stocks at once- discuss with your tax planner/advisor to spread the tax liability over a couple years.

[Smita]

We paid off our house many years ago and had a low interest. It just feels good and fiscally it would have made sense to keep up with payments it everyone has their own path

[Tony]

There’s not a ‘correct’ path. You’re either in the ‘peace of mind’ camp or the ‘financial optimization’ camp – both are valid for different reasons.

What separates the two is an emotional connection with debt.

You just need to take a good and hard look at your feelings surrounding debt and figure out if you dislike debt more than you like leveraging debt to make more money through investing.

[Jay]

At 59 and 60- a paid off mortgage means a lot more than to a 40 year old. I agree the peace of mind and decreased expense is nice.

At this stage of the game you are in keeping wealth. Not needing to maximize your returns.

My vote is sell some stocks off and pay it off. Whether aggressively over 2-3 years or just all in one spot. (2-3 years you can do some tax strategies with your stocks)

Dollar cost average your way out of the stocks and pay extra on principle could be a non- emotional strategy.

[Author]

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