Home no loan: Should you pay off your mortgage early?

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  • atl134 Salt Lake City, UT
    May 15, 2013 10:37 a.m.

    I thought the prophets were generally referring to non-mortgage/student loans type of debt like credit card debt (the sort of thing that is often due to poor money management and carries much higher interest rates).

  • high school fan Huntington, UT
    May 14, 2013 6:30 p.m.

    A house can be both a home and an asset. In my case we owe just over four years on a $400,000 house, obviously a big asset for us. My wife and I look at this as having a big asset, one that we can sell in the future to help finance our retirement and then live in a downsized house that will cost us much less. We are looking forward to that final payment but until then we will go with a 2.90% interest rate.

  • DR Hampton Portage, MI
    May 14, 2013 11:27 a.m.

    Mortgage is not a French word for slave. Just to set the record straight, here's the word's etymology: [Middle English morgage, from Old French : mort, dead (from Vulgar Latin *mortus, from Latin mortuus, past participle of mor, to die; see mer- in Indo-European roots) + gage, pledge (of Germanic origin).]
    Word History: The great jurist Sir Edward Coke, who lived from 1552 to 1634, has explained why the term mortgage comes from the Old French words mort, "dead," and gage, "pledge." It seemed to him that it had to do with the doubtfulness of whether or not the mortgagor will pay the debt. If the mortgagor does not, then the land pledged to the mortgagee as security for the debt "is taken from him for ever, and so dead to him upon condition, &c. And if he doth pay the money, then the pledge is dead as to the [mortgagee]."

  • Banker St. George, Utah
    May 13, 2013 9:05 p.m.

    In theory, investing your money into other investments rather than paying down your home seems sensible, until you look at the reality that the majority of middle-income earners do not have the positive net-worth to even begin investing in more than just their 401(k) or other employer sponsored retirement plan, if they are even doing that. I work in personal finance and from a real world standpoint, it is better to pay off your mortgage early than not. When things go south, like being unable to liquidate your assets, you will at least be able to keep your home and know it is yours. A home is an investment in lifestyle. If you can manage to pay off your home early, then you can rent it into an investment by leasing it. If you get good enough at it, you can use the majority of that new income to pay off another property and so forth until you have 5 properties (or more) by the time you retire. Passive income can be created by real estate ownership, but only by disciplined budgeting and willingness to forego instant gratification in the here and now for greater rewards in the future.

  • Brahmabull sandy, ut
    May 13, 2013 10:04 a.m.

    Baddog - Yes it was an opinion from the prophets. It isn't doctrine, I don't see that question in the temple recommend interview. It is sound advice, but it is just that - advice. Many temple going mormons don't follow it, they live far beyond their means. Yet they can still go to the temple. It depends on your individual situation. The main point of the arcitle, as I took it, is that you can do it either way and come out ahead. You can also do it either way and come out behind. If you can make more money with your cash while only paying a %3 interest rate, maybe it isn't a bad idea.

  • one vote Salt Lake City, UT
    May 12, 2013 7:05 a.m.

    Better off to save money and sell home and live in the woods.

  • Linus Bountiful, UT
    May 10, 2013 6:11 p.m.

    Those who pay off their mortgage learn the meaning of liberty. Debt is bondage. Debt is working for others. "Those who understand interest collect it; those who don't, pay it." HJGrant Those who lost half of their retirement savings in the stock market crash could have done what I did before the crash; I paid off my mortgage and now have the joy of paying cash for everything I want to buy: cars, appliances, entertainment, vacations, computers, toys, etc. Also, it is so nice to be able to help the needy in and out of the family.

  • baddog Cedar Rapids, IA
    May 9, 2013 6:18 a.m.

    Interesting article and comments coming at an interesting time. We are at a stage in our lives where we can consider paying off our home mortgage.

    We have gone both ways, hanging onto our savings or using the money to pay off our last loan obligation. We were fortunate when the economy tanked a few years ago. Many here lost 40% of their investments or more. We lost 20% and have since recovered that and been fortunate to have an increase from there.

    I agree wholeheartedly. When I was in a situation to counsel people on their finances, I realized early on what has been stated earlier: your house is not an investment. It is a place to raise a righteous family, stay out of the weather and whatever else happens there. There really is no "underwater." If you can make the payment, you can survive. If you can't, no matter how much equity is in the house, it won't matter.

    As for me and my house, we will follow the prophets and get out of debt. And it wasn't an opinion from the prophets.

  • theodoreable Heber City, UT
    May 8, 2013 8:35 p.m.

    Riverton Cougar...it was me...that someone. Yes...we should always live within our means. I blame a lot of the housing bubble on the folks that were already in houses and saw new neighbors moving in and paying high prices and then decided to re-write their own homes and take out 200K or 75K to go do something with. That is wrong.

    However, being in debt is not a sin. Yes, Interest never sleeps. However, nor does making money on my 401K. So if I can have a 100% return on my 401K because of an employer match, should I not save those monies each month instead of paying off a house?

    How about the 7-12% and 15.8% this year I am making on the 401K? No I am not a stock jock but I am active.

    So I state again a HOME is a LIABILITY. Buying a house is cheaper than renting....so keep re-writing....use the other monies wisely and do not invest what you can't afford to lose. Some simple advise.

  • Riverton Cougar Riverton, UT
    May 8, 2013 5:25 p.m.

    Somebody brought up that the LDS Church advises that it's ok to go into debt for education, a house, or a car (modestly, at that; it's certainly not wise to go into debt for a huge home that you really can't afford with your salary). That being said, it's still generally advised by church leaders to get out of that debt as soon as possible. Just because they say it's ok to go into debt for one of those three things doesn't mean the principle of getting out of debt as soon as possible doesn't apply.

  • infoman Cedar Hills, UT
    May 8, 2013 4:37 p.m.

    This is ridiculous. There is no safe investment today that pays more than what you're paying in interest on a mortgage. And the tax deduction excuse is ridiculous - in most cases you're paying far more in interest than you're saving on taxes. Pay the thing off as soon as you can, and then you'll have that much more money available each month.

  • luv2organize Gainesville, VA
    May 8, 2013 4:23 p.m.

    So many things drive me crazy about this topic. There is still such old school thinkers like, "But if people pay their mortgages off, he says, they lose the tax deduction. They lose flexibility." Why should I spend 10k to get 2.5k as a write off? I could donate that amount and get the same deduction. Also, you don't pay off a mortgage unless you have an emergency fund because you need liquid money and shouldn't rely on your house to bail you out of messes. Not having a house payment allows you to invest or save or give or go on vacations or..... it is in your hands and not the bank's.

  • Whtilcom KAYSVILLE, UT
    May 8, 2013 4:17 p.m.

    The sad thing is when you pay off your mortgage you still do not own your home. The government requires property tax payments forever, if you don't they will take your paid off home. Sorry to be the bearer of bad news.

  • Doogie South Jordan, Utah
    May 8, 2013 4:13 p.m.

    Anyone that proposes investing your money in today's environment instead of paying off your mortgage should be sued for malpractice! The markets are so manipulated and in a bubble it isn't funny. How can the market continue to go up even when company after company has reported less than expected results and it continues to get worse? Could it be that the government and the federal reserve are manipulating the markets to make everything look rosy so that they can continue their keynsian policies? Can't go on forever folks!

  • Spitvalve Denton, TX
    May 8, 2013 3:57 p.m.

    The tax deduction I get for my home loan is less than my total annual house payments. Why would I not want to pay off my house if I could (though I'm not in a position to do so yet)? I will still have to pay property taxes and insurance either way, but I'd have an extra thousand bucks every month to invest for retirement.

    A lot probably depends on where you live and what the home is worth--that hedge fund guy with the million-dollar condo is not in the same position as a family with a $165,000 mortgage.

  • theodoreable Heber City, UT
    May 8, 2013 2:28 p.m.

    a House is NOT an asset. Accounting terms state the following: "In financial accounting, assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. Simply stated, assets represent value of ownership that can be converted into cash (although cash itself is also considered an asset)."

    So...until you pay off your house it is a liability.

    All of you quoting the Prophet...he said there were exceptions. Education; Housing and Car.

    I have known only one man who paid cash for cars/house etc. My grandfather walked in and paid cash for every car he bought. Always a blue lincoln continental.

    So...your house is not an asset until it is paid off. It is a liability.

    We have re-written our primary home various times, why? To use money for investment properties where someone else is paying for our places and two to make investments. We average 10%+ a year over the last 10 years on our investments.

    I hope I have a home loan my kids can inherit :)

  • common twit Salt Lake City, UT
    May 8, 2013 1:05 p.m.

    Billionaire Mark Zuckerburg took our a loan on his home at 1.05%. He is actually getting paid to buy a house. Inflation alone makes that a risk free loan. I would bet if he loses his billions, the last thing he is going to worry about is whether his mortgage is paid off.

  • The Rock Federal Way, WA
    May 8, 2013 1:02 p.m.

    "Mortgage" a French word meaning Slave.

    Any questions?

  • washcomom Beaverton, OR
    May 8, 2013 12:59 p.m.

    "Could-a, should-a, and would-a" are three words the come to mind when people start thinking they should do this or that. Hindsight is 20/20, and you can always look back and say that things would be different if you "could-a, should-a or would-a" done something differently.

    A family needs to figure it out for themselves, by putting things out on paper and do the pros and cons each year. We can't see into the future, but we sure can use our gut feeling to determine what is the best course of action for this particular year.

  • spudnut West Jordan, UT
    May 8, 2013 12:58 p.m.

    I am fully on board with Tresidder's philosophy - There is no right answer. There really is a mathematical (or analytical) answer and an emotional answer. Sometimes the two answers are the same and sometimes they're not the same. The important task for each individual, couple, family, or whatever group, is to determine which element is most important to come up with "your" right answer.

  • Lindsay Payson, UT
    May 8, 2013 12:39 p.m.

    If your house is paid off, it's yours. If its not and your investments tank and you lose your job, you are homeless. Your house is not an investment, it is your home. The tax deduction isn't work the debt load.

  • Sasha Pachev Provo, UT
    May 8, 2013 11:54 a.m.

    I believe in the principle of being out of debt. I do not care if I miss some potentially high return investment because I chose to pay off my mortgage early. The spiritual blessings of obedience outweigh the financial benefits. That said, can somebody please point me to an investment that is guaranteed to return at least 3% annually?

    If you are worried about not having liquidity, the solution is simple. Take out a home equity line of credit, and use it only for emergencies. You can get one at UCCU, for example. This allows you be very aggressive about your mortgage and throw everything you've got on it. If you overdo, pull the amount you erred by out of the line of credit. This requires self-control - never pull out of the line of credit more than what you have put into the mortgage. You end up paying off your mortgage faster with less total interest.

  • lvnthedrm South Jordan, UT
    May 8, 2013 11:15 a.m.

    I love how narrow minded people are. Just because someone says Im investing my liguid money elsewhere doesn't mean its in the stock market. Believe it or not the stock market isn't the only place to invest.

    To those who quote prophets on all this talk, that's great for you. Those are personal opinions of those prophets. Also I think you'd be surprised by the debt (leverage) the Church has on their real estate BUT they also have liquid money well above those debts to pay them off.

    Again, being in debt and having debt are different things.

  • Owl Salt Lake City, UT
    May 8, 2013 11:14 a.m.

    The issue is cash flow. Without a mortgage payment one has more monthly cash. Perhaps it could make a marginally better return on an investment although with low interest rates that is not assured. But considering the risks and the fact that many home owners are in the latter half of life, having more discretionary income now is paramount. Some of the consultants in the article make their living from mortgages and are not exactly a disinterested third party.

  • Aggielove Cache county, USA
    May 8, 2013 11:12 a.m.

    Not having a mortgage is a good idea for some.
    But I know a lot of smart Mormon folks, who are worth millions, that owe on there homes. They could pay it off 20 times over, but why when they make millions in the market. Less educated folks don't like the market. They don't like risk. So, they of off there house.

  • PGVikingDad Pleasant Grove, UT
    May 8, 2013 11:03 a.m.

    Never, ever, ever ask a real estate agent or a mortgage broker whether you should pay your house off early. Also never, ever, ever ask a securities broker (who would love to sell you an investment with all that "extra" cash) the same question. The real answer is incredibly simple: Pay your house off as soon as you can. Anyone who says you can "easily" exceed the 3% or 4% without significantly increasing your personal financial risk is selling something. The S&P is up exactly 5% since March 1, 2000. That's less than half of 1% per year with HUGE equity swings and taxes charged on what little gains that may have been realized. And keeping a mortgage to preserve the dadgum tax deduction?! Anyone who even brings that up loses all credibility, immediately and irretrievably.

  • A Guy With A Brain Enid, OK
    May 8, 2013 10:52 a.m.

    Those counting on the stock market to make more money for them than what they could save by having no mortgage are 'betting'/hoping the stock market doesn't self-destruct.

    Up until recently I was comfortable betting that, too. However, given the fact of who we have in charge of our government these days AND the $17 TRILLION in debt we are as a nation, I don't think our economy is going to survive. I think it is more likely that we are headed for a depression and economic catastrophe that will make the Great Depression look like small potatos. Why? Because manufacturing capability is waaaaay down in America today versus 90 yrs ago and because we, as a nation, lack will, strength, ethics, integrity and morality. Back then one's word was generally their bond. Today....not so much.

    I reeeeeally need to decide what to do with my mortgage.

  • toosmartforyou Farmington, UT
    May 8, 2013 10:29 a.m.

    Notice how every person advising against paying off your mortgage is hanging on investments that "earn more" than the return on your mortgage interest? In other words, they are banking on greed and the concept that being in debt is ok if you maximize your return.

    Pres. Hinckley said his father advised him to get a modest home and get it paid for. He said he followed that advice and found it to be good anf advised others to do the same because it something were to happen to world financial markets at least your wife and children would have a roof over their heads. I find that advice to be superior to the experts who want to leverage debt.

    Look at how many are in trouble due to the bubble bursting a few years back. My mortgage has been cleared for 12 years and that has made all the difference regarding money for a family vacation, funds for weddings, vehicles for family members needing a car, educations, etc.

    Also, consider staying ahead a year on taxes and insurance, too, or you might lose your home to the government if taxes become delinquent.

    Burdensome debt is foolish.

  • Mona Beaverton, OR
    May 8, 2013 10:13 a.m.

    We paid off our house 17 years ago after 12 years into a 30 year mortgage. And have never regretted it for a day. I will never forget the elation I felt walking into the bank to transfer the funds! We've been unemployed a couple of times since and never had to worry about a big house payment and the misery that comes from getting behind on a mortgage.

    The article has 'experts' splitting hairs about how a person can come out best financially. The truth is that the security you have from being mortgage-free trumps all that.

  • lvnthedrm South Jordan, UT
    May 8, 2013 8:13 a.m.

    Having debt (leverage) and being in debt are two different things. I have my home paid off in theory because I have more than enough liquid money available to me to cover my mortgage. I don't actually pay off my house. Why? because I can earn a consistent 7% on my money compounding while I'm only paying simple interest 3.5% to my bank. I'm creating wealth this way. Some prefer to create wealth after paying off their house. These things are a situation by situation thing.

  • Riverton Cougar Riverton, UT
    May 8, 2013 7:38 a.m.

    Besides the mathematical and emotional answer, there's the spiritual answer. The prophets have said (I'm paraphrasing) "Get out of the bonds of debt and live within your means". While it's debatable as to whether or not purposefully putting off the payment of your mortgage to increase total revenue is living within your means, it is certainly not getting yourself out of debt.

    All things considered, I will follow the Lord and get out of debt as early as I can.

    May 7, 2013 9:15 p.m.

    When WILL people quit thinking of a house as an investment? It IS NOT: IT IS A PLACE TO LIVE! Only a fool would think, in retirement, of how to get money "out of their house". Why? To be in debt again? Or--what?--invest it to earn more? This is the kind of wrong-think that has gotten people into trouble since time immemorial. Pay off your mortgage, folks, the sooner the better, and rid yourselves of the sword of Damocles hanging over your head. I have 3 years to go on my mortgage, at which time I will have cut 8 years from a 30-year mortgage. Hallelujah!

  • Oldcoach Hurricane, 00
    May 7, 2013 2:53 p.m.

    I questioned my wife when she was paying double payments on our mortgage and had it paid off about 5 years short of its 15-year term. When she had it paid off is critical--early in 2007. While some of our friends were struggling to pay their underwater mortgages, we were whistling while we worked in our garden with no financial worries. Would I do it again? Absolutely. As Idaho Dad said, "Come on in, the water's fine!"

  • Idaho Dad Pocatello, ID
    May 7, 2013 1:53 p.m.

    We've been debt free for over nine years now, having paid off the 30-yr. mortgage in 10 years. That means we paid 1.5x our purchase price (instead of 3x which would be normal for a 30 year mortgage). With no mortgage, we've been able to accelerate our retirement savings and help others in ways that wouldn't have otherwise been possible. Pay your debt and live! The advice is scriptural and confirmed by the Church leaders. Remember the story of Elder Faust whistling as he worked because he paid off his mortgage? Be wise--start retirement savings early. But as the opportunity arises, pay off that mortgage!

    Come on in, the water's fine!