There is a significant amount of debate in the personal finance community about the benefits of being mortgage free. Many people love the idea of being completely and wholeheartedly debt free – mortgage included. They say you just sleep better at night, and you haven’t lived until you have a life of no payments. However, others in the community believe it’s financially wiser to carry mortgage debt and use any excess cash to invest in the market instead. They say the math works out better in the long run. In many ways, it comes down to individual preference and whether or not you think the pros outweigh any cons.
Paying off your mortgage and owning your home free and clear is a dream for many homeowners. While it requires dedication and discipline, becoming mortgage free offers numerous advantages Here are the top 8 benefits of being mortgage free
1. More Cash Flow
The most obvious benefit is having more cash flow each month. Without a mortgage payment, you’ll have hundreds or even thousands more dollars at your disposal. This extra money allows you to boost savings, invest, give to charity, travel more, or simply enjoy a more comfortable lifestyle. The options are endless when your largest recurring expense is eliminated.
2. Reduced Financial Stress
For many, a mortgage is their largest debt obligation. The weight of that debt and large monthly payments causes significant stress. Becoming mortgage free lifts that financial burden, allowing you to breathe easier. There’s great psychological value in no longer owing the bank and removing that risk of foreclosure if you hit hard times.
3. Increased Savings Rate
Freed up cash flow makes it easier to save more each month. Some homeowners report being able to save 50% or more of their income once mortgage free. This supercharges your ability to build wealth and pursue future goals like retirement or college savings.
4. More Equity in Your Home
Every mortgage payment builds equity in your property. When the loan is fully paid off, 100% of your home’s value belongs to you. This equity can be tapped in the future if needed, through a home equity loan or line of credit.
5. Tax Benefits
You lose the mortgage interest tax deduction when your loan is paid off. However, avoiding capital gains tax on appreciated home value becomes easier down the road. As a mortgage-free homeowner, you can sell and downsize without triggering capital gains tax on profits up to $500,000 if married filing jointly.
6. Home Security
Owning your home free and clear provides great housing security, especially heading into retirement. You never need to worry about rising housing costs, unaffordable mortgage payments, or losing your home. This peace of mind is invaluable.
7. Ability to Retire Earlier
A paid off house makes reaching financial independence easier, since your monthly expenses are greatly reduced. For some mortgage-free homeowners, this flexibility allows them to retire years earlier than previously envisioned. Others choose to shift to part time work or self-employment.
8. Financial Legacy
Leaving a fully paid off property to your heirs is a valuable gift. You provide them housing stability without the burden of a mortgage. This lasting legacy sets the next generation up for success.
Final Thoughts
Becoming mortgage free requires commitment, budgeting, and sacrifice. However, the numerous benefits for your finances, security, and peace of mind make it a worthy goal. By freeing up monthly cash flow, reducing risk, building equity, and gaining stability, owning your home outright positions you for true financial independence.
Concerts and Sporting Events
At a time when we were just getting our professional hockey team back, and it seemed like every other week there was a performer I wanted to go and see, we stopped going to these things.
We are just starting to get back into the concert scene, and I really missed going to these concerts.
(TBH :This is one of my regrets, there were a few bands that came through that were on my bucket list, and it doesn’t look like I’m going to see them again. )
There are a lot of other things that we cut. If you want you can go here to see all the things we gave up to become mortgage free
What we did instead.
You’re likely wondering, “What the heck did you do, you strange, handsome personal finance geek?”
The truth was we had a young family. We spent time together. We listened to all of our parents who said, “These are the good years, make sure you take time to enjoy them.”
So we had family time, all the time. We talked, we played games, we learned to enjoy our new family dynamic.
That’s something we still do today. I can honestly say that I enjoyed those years immensely, and while going without some of the things I mentioned was an adjustment, I’m happy we did it.
I would put out the argument that if you were going to embark on paying off your debt quickly, that doing it with a young family is the best time. You don’t need to put your kids in lots of activities. They are happy to just be kids. It’s as time goes on that it gets harder, when your time and money is going towards their activities and other things to make memories.
10 Benefits Of A Paid Off Home (SURPRISING)
FAQ
What are the psychological benefits of being mortgage free?
Psychological Benefit I can honestly say that we are happier when we are mortgage-free. There is less need to watch every dollar we spend and earn so closely. There is pride in knowing that we own the roof over our heads. And there is a massive sense of achievement in knowing that we accomplished such a large goal.
Is it better to be mortgage free or have savings?
KEY RULE: If your mortgage rate is around the same, or higher than your savings rate, then it makes sense to overpay… That’s because when it comes to savings, the reverse isn’t automatically true. A higher savings rate could beat overpaying your mortgage, but it won’t always.
Does 1 make a difference on mortgage?
No matter what type of loan — a personal loan, your mortgage or even credit cards — a one-point difference in your rate offers significant savings (or can cost you) when it comes to the interest you’ll pay.
Why is it not smart to pay off your mortgage?
- 1) You lose your mortgage interest deduction.
- 2) You lose a low borrowing cost.
- 3) You tie up capital in an illiquid asset.
- 4) You decrease your financial returns.
- 5) You might start being less efficient with your time.
- 6) A chance your credit score might take a hit.