Never pay off the mortgage early!

Never pay off the mortgage early!
In the short term, it feels great to pay off your house, but you are sacrificing long term wealth. It may take decades to see the benefit of saving and investing money in the market versus the short term psychological gain of having paid off a larger part or the entire mortgage.
You often hear people say “My house is paid off. It is such a huge peace of mind.” However, what did you trade to achieve less debt? You have forgone returns on your money that would have most likely been in excess of the debt you paid down.
With a 30 year fixed rate mortgage, you pay roughly double the cost of the house over 30 years.
At 7%, a dollar invested in the market doubles every 10 years.
That is a big difference. Having your money invested in the market leads to it multiplying at a much faster rate than if you were to pay off debt.
Consider how interest is calculated differently between a mortgage and your investments. With a mortgage, you are paying simple interest. Once a year, the interest is calculated. With your investments, your money is getting compound interest which is much more complex, varied, and advantageous to you. You are earning returns and interest on previous returns and interest. Albert Einstein said, “The most powerful force in the Universe is compound interest.” He referred to it as one of the greatest “miracles” known to man. Compound interest is interest added to the principal of your investment so that from that moment on, the added interest also earns interest.
Peace of mind changes over time. In 30 years, you will have much more peace of mind from a huge retirement account than the peace of mind you can get sooner by having the mortgage paid off. Paying off a home and being debt free is vastly overvalued and overrated if your end goal is a comfortable retirement, which it should be.
There are risks that people do not follow through when they say they will pay off the mortgage. Consider people who say that are going to pay down the mortgage, but then turn around and spend that money on other things. Another thing to consider people that pay off the house and then take out a home equity loan to spend on things.
Having a lot of money saved and invested properly makes life that much easier. Sure, you may still have a large mortgage payment, but think of all the interest and dividends your money is earning. Your returns should cover any savings from paying off your mortgage earlier.
Works Cited:
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