I Could Pay Off My Mortgage Tomorrow if I Wanted. Here's Why I Won't

by Maurie Backman | Updated Sept. 7, 2021 - First published on May 28, 2021

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Three people discuss finances while filling out paperwork in their home.

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Technically, I have enough savings to pay off my home completely. But I don't think it's a good idea.

When my husband and I first met, I was renting an apartment in New York City and he was living in a home he owned across the river in New Jersey. Once we decided to move in together, it was a no-brainer -- I'd give up my apartment and stop paying rent, and we'd pool our resources toward his mortgage.

A few years later, we bought a new construction home in our neighborhood, figuring we'd need more space once kids came into the mix. And while that home meant taking on a higher mortgage than what we were paying, we also profited nicely on the sale of our former home, so much so that we were able to make a 50% down payment on our new home.

Between making that large down payment and not buying a home at the very top of our price range, we didn't have to take on an extremely large mortgage from the start. And now, more than a decade later, we've made good headway in paying our home off. We're also a pair of fairly disciplined savers, so we have grown our savings account nicely through the years.

At this point, between our savings and our lower mortgage balance, my husband and I actually have the ability to pay off our home and own it outright. But as tempting as that is, here's why we'll continue to carry a mortgage.

1. It's so cheap for us to borrow

Last summer, when mortgage rates hit a record low, we decided to refinance from a 30-year loan to a 15-year loan. In the process, we scored a super low rate on our home loan that leaves us paying minimal interest. Because of that, it makes sense for us to keep borrowing and put our money to work elsewhere -- for example, invest it at a higher rate of return than the interest rate on our mortgage.

2. There are tax benefits to having a mortgage

My husband and I itemize on our tax return, and carrying a mortgage serves as a nice deduction for us. While you can't deduct your entire mortgage payment for tax purposes, you can deduct the interest portion of your loan. Between that and our (unfortunately) sky-high property tax and state income tax bill, the deductions add up.

3. We like the security of having more savings

If we were to pay off our home right now, we'd have less financial flexibility, because our money would be tied up in our home. And homes are fairly illiquid -- meaning, it's a lot harder to sell a home for cash than it is to sell a stock or simply take a withdrawal from a savings account. We'd rather have easier access to our money and the option to spend or invest it, and if we pay off our home completely, that option largely goes away.

Some people hate the idea of owing money and work hard to pay off their mortgages early. While I feel similarly about high-interest debt, like credit card balances, I firmly believe that a mortgage is a healthy type of debt to have. And since the rate we've locked in for the next 15 years is so low, I don't feel like I'm throwing my money away on interest. Rather, by carrying my mortgage, I'm giving myself more financial freedom.

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