Conventional financial advice often says it’s smarter to invest extra money instead of paying off a mortgage early—especially if your mortgage rate is low. On paper, it sounds like a no-brainer: Why give up potential stock market returns of 7% or more just to avoid paying 3% in interest?
But I’m choosing a different path. I believe paying off your mortgage early can be the better strategy, not just emotionally—but mathematically and strategically too. Here’s why as we look at Baby Step 6.
1. The Conventional Wisdom: “Invest the Difference”
If you’ve been around the personal finance world for even a short while, you’ve probably heard this:
“Why pay off a 3% mortgage when you can invest that money and earn 7%?”
It’s based on a valid point: over time, the stock market has averaged higher returns than most fixed-rate mortgages. So the theory says you’d come out ahead by putting extra money into investments.
But here’s the thing—market returns are not guaranteed.
2. Certainty Beats Hypotheticals
When you pay extra on your mortgage, you’re locking in a guaranteed return equal to your interest rate.
- Got a 3.5% mortgage? That’s a guaranteed 3.5% return on every extra dollar you pay.
- There’s no market crash that can erase it.
- No inflation risk or dividend cut.
- No stress from portfolio swings.
It’s boring, predictable, and absolutely reliable—and for many of us, that certainty is worth more than chasing theoretical gains.
3. Future Cash Flow = Financial Flexibility
Let’s talk cash flow.
Every month, your mortgage eats up a chunk of your income. Imagine wiping that out. No $1,200, $2,000, or $3,000 mortgage payment hanging over your head.
That’s not just about being debt-free—it’s about freedom:
- Freedom to scale back hours at work
- Freedom to change careers
- Freedom to retire early or weather a job loss
Paying off your mortgage early frees up future cash flow, and that flexibility can make a massive difference in your financial life—especially in uncertain times.
4. Peace of Mind Has Real Value
Beyond the numbers, there’s something else at play: peace of mind.
When you fully own your home, you sleep a little easier. You know:
- No matter what the stock market does…
- No matter what happens at work…
- No matter what emergency hits…
You won’t lose your home.
That psychological safety has real, measurable value. And it’s something no index fund can offer.
5. Common Objections—And Why I Still Choose Payoff
Let’s address a few things you might be thinking:
“But your interest rate is so low!”
True—but again, that low rate is still an absolute cost. And while the stock market might return more, I’d rather take the guaranteed win today.
“You’re giving up compound growth!”
Not entirely. Once the mortgage is gone, I’ll have more money each month to invest freely. And unlike mortgage payments, those investments won’t be going toward someone else’s interest.
“It’s not tax-efficient.”
This one sounds smart—but it’s outdated for most people.
Here’s why:
The standard deduction is now so high that most Americans don’t itemize their taxes anymore. In fact, about 90% of taxpayers take the standard deduction, which means they don’t even use the mortgage interest deduction.
To put it simply:
- In 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly.
- To benefit from itemizing, your total deductions—including mortgage interest—would have to be well above that.
- Unless you have a very large mortgage, high state/local taxes, big medical bills, and major charitable donations, itemizing likely doesn’t make sense.
So for most people, keeping a mortgage for the tax deduction doesn’t actually save money—it just sounds like it does.
6. My Plan: Balance, Not Extremes
I’m not suggesting you should never invest while paying off a mortgage. I still invest consistently for retirement and long-term growth. But when I have extra money to put somewhere?
I prioritize debt freedom—because of the certainty, the future flexibility, and the peace of mind.
Use my Debt Payoff Calculator App
(Want to get your debt-free date with extra principal payments thrown at your mortgage? This tool can help.)
Final Thoughts
You won’t find this strategy on every financial advice blog, and that’s okay. Personal finance is personal. But if you’re the kind of person who values certainty, hates debt, and wants more control over your financial future—then paying off your mortgage early might be the smartest “investment” you can make.
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