I have struggled with the idea of paying down our mortgage quickly or letting it be, to payoff slowly per the standard schedule instead. I see the mental benefits of ridding ourselves of all debt. But looking at the situation objectively, our mortgage size compared to our income is not debilitating. And having some debt is considered, by many, a good financial strategy, particularly when the debt is backed by something tangible like a property.
We are fortunate to keep our expenses lower than our income, so we have excess money leftover each month to use for saving, investing, and debt paydown. We refinanced our mortgage about 2 years ago as well with the lower rates (thanks to the pandemic), so the amount of interest charged on our mortgage is not too high as well. And if we remain disciplined (that is the big “if”) and invest the extra funds in the stock market (instead of throwing it at the mortgage), the average return may be higher. This is of course, not a given, as the market is hard to predict. But keeping money in the market over the long term generally yields higher returns than the amount of interest on our current mortgage.
This is thus the great debate I struggle with in my head as I approach our savings goals. I have long pondered this question in my own mind, and have looked for inspiration from others by reading blogs, discussion boards, and books. I have come to the conclusion that this is a personal decision, and both avenues can be correct.
I think one thing that guides me in my financial goals is how I feel when I make a decision to throw “X” amount at a goal. For example, I remember feeling much greater peace and less anxiety a few years ago when I committed to prioritizing every last penny I could at my student loan debt. And after paying off my student loans, I thought about how much to save toward college for each child. Thinking through amounts, I remember feeling a large amount of inner calm after committing to a certain amount for each child, to hopefully achieve a certain goal amount by the time they graduate high school.
I think that the student loan debt I paid off aggressively was a different beast, and I am thankful I got inspired to pay it off quickly by The White Coat Investor. (I wish I could have paid it off even faster, but I did the best I could, paying it off in 6 years.) That student loan debt initially had much higher interest, and the end result (my own mind development/career development) is not something we can sell later on. A house, on the other hand, is a physical asset that can be sold, so I think it is a different kind of debt, that has more investment qualities to it.
And also, we are fortunate as a couple not to carry credit card debt. That also, I think is a totally different beast from mortgage debt, and something to pay off ASAP due to its much higher interest rate. Your loan balance can get insurmountable and can stick around forever if you are not careful, even if you are still paying the minimums. This I think is to the credit card company’s advantage, and what they obviously would prefer. They want our money.
Right now, we are paying the mortgage with a bit more each month, plus I have set up to make payments every 2 weeks. This way, once or twice a year there is an extra payment being made. I am toying with the idea of changing goals and putting more toward the mortgage, instead of my IRA, just for the psychological benefits. And with the backdoor Roth IRA potentially going away soon, this has made me think even more about throwing more of my money at the mortgage instead of my IRA. I still max out my 401k, and still invest in a brokerage account a bit extra, and save to my kids’ 529’s, and save some in a cash account for future expenses and to buildup a cash cushion. I wish I could “do it all,” but there are only so many funds available, so you need to pick and choose your priorities, and how much you want to throw at each goal.
My perspective and approach may change in the months or years to come. I think this is a healthy part of evolving interests and goals, not necessarily a sign that my current pathway is wrong. But I hope and plan to keep chipping away at this debt. Paying off more of our debt will be a rewarding experience. I am sure owning your home outright is a great feeling, a feeling I hope to know firsthand someday soon.
