Is it smart to pay off your mortgage early?

The goal of owning your home free and clear is usually considered the end game when buying your first property in the Charlotte Area and elsewhere. The vision of the day when you make that last mortgage payment is exciting. And whether that goal is achieved in retirement or sooner, the prospect of a “free rent” future has great appeal!

So, when a  financial planner argues against paying off your mortgage sooner rather than later, it makes for interesting reading. One planner claims it’s better to hang on to your mortgage rather than pay it off early.

In his article, 11 Great Reasons to Carry a Big, Long Mortgage, Ric Edlemen, presents a laundry list of possible financial benefits for delaying mortgage payoff. As one of the nations’ foremost financial advisers, Edelman also has a well-earned reputation for brash presentations. And he does list eleven reasons why “you should have as big a mortgage as you can get and never pay it off.

Some of the reasons are fact-based—but not pertinent. For instance, Reason #1 is that “your mortgage doesn’t affect your home’s value.” True: whether its value rises or falls depends mostly on the current Charlotte Area market, but that isn’t a reason for or against carrying home loan debt.

The same is true for Reason #2, which is that a mortgage “won’t stop you from building equity…” The logic here is the same: Even if you never paid down your home loan’s principal at all, if the expected market value rises (Edelman argues it’s “almost certain to grow in value over the next 20 years”), your equity would grow independently.

More convincing are the remaining nine reasons, leading off with Reason #3, “A mortgage is cheap money.” This will likely earn head nods from every financial analyst, and it’s doubly true with today’s incredibly low interest rates. It may only be useful to those who have ideas for places where the “cheap money” can produce juicy profits—but what financial planner can’t suggest a few?

The other reasons include:

  • Tax benefits
  • Dwindling real cost of mortgage payments over time due to inflation
  • Liquidity provided by refinancing (“selling without selling”)
  • Wealth creation possibilities of money invested sooner rather than later

Each of these can be illustrated by graphs and charts in Edelman’s article if you’re interested in learning more.

Whether you are more of the less-owed-the-better mindset or a part of Edelman’s big long mortgage school, one thing holds true in both cases: buying your Charlotte Area house is the necessary first step. We can be of immediate value in that department—connect with us today to learn how we might help you find your first, or your next, home.

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The article referenced and links are provided as information and for convenience and do not constitute an endorsement of the linked-to website or its owner. We have no partnership with the website or its owner, nor are we compensated in any way for sharing this information. We encourage you to seek an advisor in your local area to develop a financial plan that meets your unique needs.

Jennifer Tuttle is NC Real Estate Broker, SC Real Estate Agent, and a REALTOR®. Trained as an accountant specializing in taxation her passion for design caught up with her and she transitioned to a successful career as a personal assistant, and later a photo stylist. She combines her love of numbers and design and a passion for helping people into her real estate career. In her spare time, you might also find her on the lake, at the beach, or teaching a yoga class.

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