Why we're NOT paying off our mortgage early

What’s the benefit in paying off your mortgage early?

Ok, yes, there’s an easy answer here: In however many years, you’ll have a fully paid-off mortgage. But there are more nuanced reasons that people feel really strongly that paying off their mortgage ASAP is a great financial move.

• Security. Having a paid-off home is something that can give you an enormous amount of flexibility with your monthly cashflow. It’s a lot easier to save up six months of living expenses (the recommended emergency fund amount) when your housing costs don’t include a mortgage, you know?

• Risk profile. Choosing to pay off your mortgage often means choosing it above other financial goals, and some people are most comfortable putting their money into something more tangible than other investments.

• Guaranteed return. When you know the interest rate you’re paying on a debt, you can calculate exactly how much money you’ll save over the long term by paying it down early. Since most investments don’t offer that kind of guarantee, it can be a low-risk option that suits some people.

As you can see, these reasons are all pretty closely linked: Paying off your mortgage early feels like a safe move. And as I’ve always said, personal finance is about feelings. Preferring the safety of knowing what will happen as you pay down your mortgage is a valid reason on its own!

However … it’s not something I’m interested in, and not because I am Captain Risk with my investments. (Although I am.) Here are the three reasons I’m not interested in paying our mortgage off early.

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1. Our interest rate is incredibly low

When we renewed our mortgage this summer, we locked in an incredibly low rate for the next five years, so I know that at least for that amount of time, the interest we’re paying on our mortgage is in the same ballpark as the interest we’re earning on our high-interest-rate savings account.

Now, to be very clear, we don’t have mortgage-level amounts of money in our savings account — and that’s actually another reason we aren’t paying it off early — but it does mean that the calculations about how much money we’d save in the long term by paying off the mortgage early aren’t all that compelling.

If interest rates look like they’re creeping up, we might reevaluate the decision as we get closer to renewing, but for now it just doesn’t make a ton of financial sense. At least, not in the way it would make sense if mortgage rates were 8% (or 18%).

Which, yes, are both rates people have paid on mortgages in the past.

2. We have other priorities right now

When I think about our financial priorities, the biggest one that comes to mind is retirement, not our mortgage.

Neither of us have pensions, so retirement is fully on us. Because of that, it’s always been priority No. 1, even when we were saving up for a house down payment or the wedding.

And the fun thing with financial goals is that there’s only so much money you can put toward them while still, you know, living life.

So while, yes, a paid-off mortgage sounds great, and if our salaries both doubled we would probably pursue it in some way, for now it just doesn’t make the cut ahead of our other savings goals — especially when we can put an extra $100 a paycheque toward retirement investments instead.

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3. We’d rather have liquid savings

The other thing about paying off a mortgage (or any debt, really) is that most of the time, you can’t get that money back.

Compare that to putting money into a savings account, or even investing it. If you needed the money later, you could get it relatively easily.

For where we are in our lives, having more access to cash if we needed it makes sense. We recently hit our goal numbers for our house emergency fund and our work emergency fund, but even so, you never know what might come up.

Just this summer, we were facing a major vet bill and we were incredibly happy we had cash on hand that made it a no-brainer instead of a financial stressor.

My reasons are just that: my reasons

If you take one thing away from reading this, please let it be that when it comes to financial choices like whether or not to pay off your mortgage early, there’s no “right” answer. Or, in this case, there are multiple right answers!

So when you see a headline about someone paying off their mortgage in a wildly short amount of time and feel like you’re behind, don’t. Just remember that it was their priority — and that doesn’t mean it has to be yours.