When I bought my house in 2015, I took on a truly sizable debt, not just the usual credit card balances or car payments. This was a great looming thing, a mortgage. Six figures. Intimidating.
The intimidation didn’t last long. After all, monthly payments for housing had been a fixture of my adulthood since age 19 and my first little apartment in the Mount Vernon section of downtown Baltimore. This new monthly payment was at least partly something I was paying to myself (allowing that mortgage interest accrued to the lender and not to me.) So the mortgage never gave me any sleepless nights or anything like that. A fairly low interest rate and substantial initial down payment helped; I had a big blob of equity from the get-go. And I figured the house would increase in value. Which it has, spectacularly, and will likely continue to do so.
Nevertheless, I originally planned to pay off the mortgage debt as soon as possible, and to that end set myself a goal of being mortgage-free within ten years. But rather than pay the money directly into the mortgage account, I choose to put the extra funds into investment accounts—index funds and decent-yield certificates of deposit on the whole—so they could earn while they accrued.
I reached my goal in 2022: seven years rather than ten. This afternoon I could waltz into a Chase bank, or go online, and arrange to pay off the entire mortgage: bada-bing, bada-boom. Thus Sitting Pretty. I know I can render myself mortgage-free. Property taxes, homeowner’s insurance, utilities would remain. But they’re pipsqueaks compared to the mortgage proper.
Goal realized, I realized that I didn’t want to pay off the mortgage yet. Here’s why:
- Given that I’m still very much employed and working, cash flow simply isn’t a problem. I make way more than I spend, house payment or no house payment.
- Why let go of the tax breaks for mortgage interest?
- The invested funds earn more than the interest on the mortgage. Net gain.
- Why lock up all that money in a non-liquid asset?
The upside: I’ll keep on making the mortgage payments until I retire. Which, barring the unforeseen, won’t happen any time soon. Then I’ll act. In the meantime my investments will have grown and the mortgage balance will have shrunk: heads you lose, tails I win.
Sitting pretty.