- Paying off our mortgage early wasn't as financially freeing as I'd hoped.
- Our financial advisor recommended we keep our mortgage and invest our money instead.
- Having no mortgage has advantages, but I wish we'd listened to our advisor more.
I distinctly remember where I was when I paid off my house — sitting in a Costco parking lot. I hung up that call with a feeling of elation.
With the extra money we'd pocket each month, my husband and I could buy practically anything we wanted: fancy dinners out, new clothes, and a better car that wasn't more than a decade and a half old. And, of course, we'd start saving more.
At 30, I felt certain our lives would drastically change, but six years later, the reality is less freeing than I'd hoped.
We worked hard to pay off our mortgage
We purchased a cheap foreclosed property in 2011 when house prices and interest rates were still low from the housing crash three years prior. Our mortgage was $150,000.
It was our dream to get out of the grind, and we thought paying off our mortgage was how we could get there. We took side jobs and refinanced from a 30-year mortgage to a 15-year one, which helped us knock out more than 30% of the mortgage in three years.
Then, I received a settlement check for a bad accident I was involved in that could pay off 80% of the remaining loan, but when that opportunity was within reach, we hesitated.
We visited a financial advisor to ask him what to do with the settlement money. He told us it made more sense to put it toward investments and keep our mortgage. Our mortgage had a 3.25% interest rate, and the advisor said investments would yield a higher return.
I didn't like our advisor's advice, but he turned out to be right
On the way home from the meeting, I felt my stomach twist. I didn't like our financial advisor's advice.
I wanted to pay off our house so it wouldn't hang over our heads. I wanted that "financial freedom" that the personal finance expert Dave Ramsey touts on his show.
In the end, we compromised. We used some of the money to max out both of our Roth IRAs for the year and put three to six months of expenses in a savings account, per our advisor's recommendation. The rest, we put toward the mortgage, and we had it fully paid off within the next three years.
After paying it off, I was elated that we had $1,100 more to work with each month. I made a budget on the EveryDollar app and opened Robinhood and Betterment accounts, determined to pour as much as possible into these investment avenues.
Early retirement, exciting vacations, and a new car were just around the corner — then, reality quickly set in.
Paying off the mortgage didn't feel as financially freeing as I hoped
The car and house maintenance piled on — a new water heater for the house, a catalytic converter for the car, insurance deductibles for my family. None of those ordinary life expenses magically vanished.
While we no longer had a mortgage, that didn't exempt us from paying our ever-increasing property taxes and homeowners insurance. These bills add up to the equivalent of a few months of our previous mortgage every year.
I'm not complaining; I just hadn't realized the money we saved from our mortgage would often disappear toward bills and unexpected expenses.
Plus, our financial advisor was right. Since their inception, we've watched the money we put in the Roth IRAs grow at an 8% rate. So, if we'd kept the 3.25% interest on the mortgage and put the settlement money into an investment portfolio, the return would have been greater.
One huge benefit of paying off a mortgage, however, is peace of mind.
When my husband was laid off in 2024, we survived on a minuscule budget, cutting out all unnecessary spending and living off our savings account. We managed to stay completely out of debt during that hard time.
