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 stress relievers: paying off your home. I gave it a lot of thought, but it didn’t make the cut. It’s not that it’s not important, but the joy it brings might not be what you expect, and if it does bring joy, it’s often fleeting.
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.
Experiences of Paying Off Your Home
We all have different views, experiences, and biases, which is why I love hearing different perspectives. Here are some thoughts from two readers who have paid off their homes:
One reader, CMAC, said that paying off the mortgage on their primary residence would be their top priority. They reasoned that if something were to happen to them, their spouse and children wouldn’t be forced to downsize or move to a lesser neighborhood, which could cause additional emotional trauma on top of dealing with their loss.
Another reader, Bill, shared that paying off his house was the most stress-relieving and happiness-inducing financial move he made. He also mentioned paying off his business credit line, his business, creating a will and trust, and paying for his daughter’s college in cash as other significant financial moves.
Why Paying Off a Home May Not Bring You Stress Relief
I’ve personally paid off a vacation property rental and a rental that used to be my primary residence, and I’ve also 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.
Here are some reasons why paying off a home might not be as satisfying as you’d expect:
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Ongoing property taxes: Even after you’ve paid off your mortgage, you’ll still have to pay property taxes. If you don’t, you could lose your house. For example, I bought a fixer-upper in 2019 for cash, and the annual property tax bill is around $23,000. Every time I get a property tax notification, it dampens the joy of having a paid-off home.
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Ongoing maintenance issues: Every time there’s a maintenance issue, my stress level increases. Owning physical property comes with its share of upkeep.
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Negative real mortgage interest rates: Paying off a mortgage with a negative real interest rate isn’t the best financial move. The higher the negative real interest rate, the worse it feels to pay off a home.
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Investing FOMO: Paying off a mortgage means you could be missing out on greater investment gains. It’s hard to overcome the fear of missing out on investment opportunities, especially in a bull market or economic rebound.
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Financial wins don’t elevate your happiness for long: Due to hedonic adaptation, we quickly return to our baseline happiness level after achieving any type of success.
Perpetual Versus Temporary Financial Moves
Paying off a home can bring peace and reduce financial stress. However, because there are ongoing taxes and maintenance costs, the financial relief might not be as great as expected.
The more permanent the financial move, the more it can relieve stress and anxiety. For example, creating a revocable living trust and a death file provides lifelong coverage for you and your heirs, and there are no ongoing costs.
Paying Off Your Home Is Fine
If you want to pay off your home sooner, go for it. If you’ve already paid off your home, congratulations! Life is much easier when your living expenses are low.
However, I want to warn you about the potential disappointment you may feel if you’re currently trying to pay off your home earlier. The harder you work and the more you sacrifice, the less satisfied you may feel once your home is finally paid off.
In conclusion, I wouldn’t focus all your efforts on paying off your home as soon as possible. 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 anyone regret having a lot of capital tied up in their home? Being house rich but cash poor can be stressful.
To invest in real estate more strategically, check out Fundrise and Crowdstreet. These platforms offer a way to diversify and earn passive income.
