Should I Pay Off My House?

Whether or not you pay off your mortgage depends on several factors.   You need to carefully examine your individual situation and make the choice that gives you the greatest advantages.   Someone else’s plan may or may not work for you.   The following are some things to consider when you are deciding which route you should take.

How close are you to paying off your mortgage?   Initial mortgage payments are weighted heavily towards interest payments.   A huge portion of your monthly payment is applied to your loan’s interest amount.   As the years go by, more and more of your mortgage payment will be applied to the principal of the loan.   You can use your mortgage interest payments as a tax deduction every year.   If you are nearing the end of your mortgage loan period, it might be worthwhile to pay off your mortgage if you can afford it.   The tax advantage of having a mortgage becomes less lucrative the closer you get to paying off the loan.

How comfortable do you feel with your mortgage?   Making the decision to pay off a mortgage or continue to make the monthly payments is a very personal and individual decision.   Some homeowners cannot even think about having a mortgage loan for so many years, and others do not give it a second thought.   If having a mortgage makes you uneasy, you probably want to consider paying off the loan.   If you feel comfortable with your current mortgage, there is probably no need to figure out how to pay it off early.

How long do you plan to stay in your home?   If you think your home will be your last residency, it may be to your advantage to go ahead and pay off the mortgage if you can.   If there is a chance you will be moving within the next few years or so, consider keeping your mortgage.   Homeowners that are expecting to downsize will probably fair better if they do not pay off their mortgages, especially if they have been in their current home for many years.   It is very likely that the equity they have built up in their home will give them a substantial amount of cash for a sizeable down payment on a smaller home.   Depending on the amount of equity, they may be able to buy a smaller home outright.

How close are you to retirement?   And how much do you have saved?   If your retirement is quickly approaching but you do not have enough saved, pay off your mortgage if you can.   This will give you a sense of security and give you one less payment every month.   If you have ten or more years before you retire, invest your money in a retirement savings account instead of paying off your mortgage.

What other payments do you have?   If your credit cards have balances that are carried forward every month, use any extra money to pay off these cards.   Other loans with higher interest rates than your mortgage should also be paid off before your mortgage.


  1. I have an online calculator which will show what you save in interest and how much earlier you can pay it off. If you assume that inflation will pick up you might be better to buy TIPS.

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