Baby Step # 6 – Pay Off Your House Early
Pay off the house early… Why would I do that?
There are several aspects to our financial decisions. If you just look strictly at the math, especially if you have recently financed your home at a record low interest rate, a case can be made for just making regular payments and investing “extra money” in a financial vehicle that will earn more than the 3%-5% interest that you pay on your mortgage. There are lots of financial investment professionals that will tell you why paying off your mortgage early is not a good idea and they will also help you invest the “extra money”… usually in a product that they sell.
Then there is the emotional side of our financial decisions. Money is not just about math… If it was you would seldom be willing to pay the price of the things that you have already purchased. If the price tag of everything that you bought on credit included the price + interest you would most likely make different decisions. When you look at the “investment opportunities” that you have for the “extra money” that would be used to pay the house off early, you never get the compound interest calculation of the true cost of the mortgage + interest. Money is not just about the math, emotion is ALWAYS involved. Jesus even acknowledged this when he said, “for where your treasure is, there your heart will be also.” When it comes to paying off your home the saying, “Home is where the heart is” rings very true.
Paying off your house early comes with the intangible benefits of financial freedom, inner peace and emotional security. None of those are mentioned by financial experts but there is something about owning your home, something about knowing that you will have a place to lay your head at night, that deep down inside we feel really good about.
We sometimes make too many financial decisions based on emotion and learned behavior. To help you balance the equation, here is a Mortgage Payoff Goal Calculator to help you with the math:
- Simple. Thrifty. Living.: 6 Financial Hurdles to Jump Before You Turn 30 (huffingtonpost.com)
- Setting a new retirement income target – maybe you need to save less than you think (business.financialpost.com)
- Should I Refinance My House? (sloanglenn3.wordpress.com)