4 Reasons Why Suze Orman Believes Owning a Home Is One of the 'Greatest' Forms of Financial Independence

According to Suze Orman, "One of the greatest forms of financial independence is truly owning your own home outright." Orman believes you should focus on paying off your mortgage before you retire -- even making that your No. 1 goal as long as you plan to remain in your home.

Orman listed several reasons why she believes owning a home mortgage free is so important. Here's what they are, along with some advice on whether you should listen to Orman and make mortgage payoff a primary financial objective.

1. You'll always have a home you can live in once you've paid off your mortgage

Orman explained on her podcast that once you have paid off your mortgage, you will have a home you can live in without a housing payment. As she said, this is true even if your home declines in value.

That is accurate. But, you can't assume your housing costs will disappear just because you have no home loan. You'll still have property taxes, insurance costs, and home maintenance expenses to pay. So, while your housing costs will undoubtedly be lower, having a paid-off mortgage isn't going to guarantee you will be able to stay in your home forever.

2. You could lose money if you invest it in the stock market

Orman also warned that while she's heard people say to invest in the stock market instead of paying off a home loan, the reality is that there's the potential to lose money if you do that.

She gave an example of a situation where someone came into $1 million in 2008 and asked what to do with it. She advised paying off the home, and said she received tons of mail saying this was bad advice because the money could be invested at a better return.

Orman said that she ended up being correct, because the real estate market collapsed and the stock market plummeted and the person who she advised would likely have lost money in the market and seen the value of their real estate decline.

While this may have been true on a temporary basis, the stock market has since recovered from the 2008 crash as has the real estate market. If you had opened a brokerage account and invested in the S&P 500 in 2007 and you reinvested all dividends through to 2023, you'd have made an average annual return of more than 9.24% annually. That is almost assuredly a better rate of return than you would have gotten had you paid off your mortgage in 2007 as she advised. Your return on investment (ROI) from early mortgage payoff is just the interest saved.

3. Your home could go down in value and you might not be able to pay off your home loan

Orman also indicated that she felt it would be better to pay off your home loan because of the chances that your house could go down in value and you might not be able to. She said that might have happened to the person she advised to pay off their mortgage in 2008.

Of course, if you made a reasonable down payment on your home -- like 10% to 20% -- and steadily made payments on your home for several years before you considered selling, the real estate market would need to decline substantially to end up underwater.

Even if you do end up owing more than your home is worth, this is really only an issue if you sell it. Much like the stock market, you won't lock in any loss (or gain) on a home until you sell it. As long as you can afford your monthly mortgage payments, you wouldn't really need to worry about this.

4. You'll feel more secure if you own your home outright

Finally, Orman said that owning a home is a great form of financial independence because you'll feel more secure if you don't have a home loan. This indeed is true for many people.

The reality is, you typically should pay off your 30-year mortgage on time, rather than refinancing multiple times. For most people, paying off a mortgage early isn't the right choice. You're likely better off investing and earning a better ROI than you'd get from paying your loan down ahead of schedule. You'll end up with a higher net worth and hopefully will have enough invested over time that you could pay off your remaining loan balance in retirement if you need to do so.

So, while homeownership can make you more secure -- especially if you have a paid-off home -- so can paying your mortgage as planned (rather than early) and investing to build a large nest egg.