I’ve received some great feedback from readers, and it made me realize that I missed out on a crucial financial step in my list of top financial moves to reduce stress: paying off your home. I gave it a lot of thought, but it didn’t make the cut for a dedicated spot on the list. The thing is, paying off your home might not bring the joy you’re expecting, and if it does, it’s likely to be short-lived.
For those of you who are eager to pay off your home as soon as possible, let me share some insights from my own experience of paying off two mortgages and still owning the properties today.
Experiences of Paying Off Your Home
Everyone has different opinions, experiences, and biases, which is why I love hearing different perspectives. Here are some thoughts from two readers who’ve paid off their homes:
One reader, CMAC, said that paying off the primary residence mortgage would be their top priority. They pointed out that if the mortgage is paid off and something happens to you, your spouse and children won’t be forced to downsize or move to a lesser home and neighborhood. This could save them from additional emotional trauma and the potential loss of their social network.
Another reader, Bill, listed paying off his house as his number one financial move that relieved stress and brought happiness. He also mentioned paying off his business credit line, his business, creating a will and trust, and paying cash for his daughter’s college.
Why Paying Off A Home May Not Bring You Stress Relief
I’ve personally paid off a vacation property rental, a rental that used to be my primary residence, and bought a primary residence with cash. The feedback from these two readers made me question why I didn’t give “paying off a home” a dedicated spot in my post. In fact, I had forgotten that I lived in a paid-off home between 2019 – 2020! Here are some reasons why paying off a home might feel disappointing afterward:
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Ongoing property taxes: Even after paying off your mortgage, you’ll still have to pay property taxes forever. If you don’t, your house could be repossessed. For example, the fixer-upper I bought in 2019 for cash has an annual property tax bill of ~$23,000. Every property tax notification I receive reduces my joy of having a paid-off home.
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Ongoing maintenance issues: Every time there’s a maintenance issue, my stress level goes up, not down. Owning physical property comes with its share of upkeep.
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Negative real mortgage interest rates: Paying down a negative real interest rate mortgage is not an optimal financial move. The higher the negative real interest rate, the worse it feels paying off a home.
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Investing FOMO: Paying down a mortgage means you could be missing out on much greater investment gains. It’s why rich people still take unnecessary investment risk!
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Financial wins never elevate your happiness for long: Sadly, due to hedonic adaptation, we quickly revert back to our steady state of happiness after achieving any type of success.
Perpetual Versus Temporary Financial Moves
Paying off a home will bring you more peace and less financial stress. However, because there are perpetual taxes and maintenance costs to pay, the financial relief may not be as great as expected.
Term Life Vs. Whole Life
Getting an affordable 20-year term life insurance policy felt the best to me partially because it buys me 20 years of security. But given I just talked about the importance of permanence, it is logical to conclude that getting a whole life policy (lasts your whole life) will provide even more comfort.
Paying Off Your Home Is Fine
If you want to pay off your home sooner, go for it. If you’ve paid off your home already, congratulations! Life is so much easier once your living expenses are low.
In conclusion, I wouldn’t concentrate all your efforts on paying off your home ASAP. Instead, be dynamic in your financial decision making based on the economic conditions at hand. Diversify your financial moves to help bring greater peace of mind.
Reader Questions And Suggestions
If you’ve paid off your primary residence, how long did the joy last? Or did you feel a let down once your home was paid off? Does anybody regret having a tremendous amount of capital locked up in one’s home? Being house rich but cash poor can be stressful.
To invest in real estate more strategically check out Fundrise and Crowdstreet. Both platforms offer great opportunities for diversification and earning passive income.
