People who have had a bad experience with investing may feel that paying down their mortgage is the only secure thing they can do. "That is fully shaped by their losing money in their investing," Tresidder says. "It is really important to see how your values are shaping your choices. We are not computers, and this is not a fully rational decision. Some people approach it as simply a mathematical expectancy decision of whatever gives the highest investment return. That is incredibly naive."
Understanding that there are multiple ways to approach the question can help when spouses disagree. One may want security in the home, the other may want financial freedom. "It isn't like they are opposites," Tresidder says, "but they can result in arguing over which one is the appropriate approach to take.
Settled and secure
Terry Moore in American Fork, Utah and her husband were on the same page. When Moore's husband became very ill, they planned for her to take the proceeds from his life insurance and pay off their home. After he died last November, Moore made a money transfer to the credit union that held the mortgage.
"Everyone says, 'Don't you feel wonderful now that you paid off your house?'" she says.
Because the money came from the life insurance, Moore says she doesn't feel the elation other people might feel. One financial counselor was initially concerned when he heard she had paid off her home, but Moore thinks it was the right thing for her. "I feel like I'm hedging my bets," she says. "It's done, it's off my plate and I feel good about it."
For some people, it is strictly mathematical money augmentation. For others, it is about security and risk aversion. Tresidder says it doesn't have to be an all or nothing proposition; people can do a little bit of both if they wish. A person can pay off a mortgage a little faster while still investing other funds.
But every month, when a mortgage payment doesn't come due, Moore, Cohen and many others smile.
"I'm satisfied," Moore says, "I'm deeply satisfied, settled and secure that it was the right thing to do."