Financial Planners Urge Against Paying Off Low-Interest Mortgages NOW

URGENT UPDATE: Financial experts are urging homeowners to reconsider the common goal of paying off low-interest mortgages early, a trend gaining traction across the U.S. New insights reveal that investing extra cash instead could yield significantly greater financial benefits over time.

In a striking example, Trinity Owen and her husband, who purchased their home in East Concord, New York, in 2019, initially aimed to pay off their mortgage quickly. However, after crunching the numbers, they discovered that investing their extra payments in the stock market could potentially double their returns within 25 years. “The difference shocked us,” Owen said. “We no longer pay a dime more on our mortgage, even though we could pay it off from our investments more than twice over.”

This revelation is part of a broader conversation among financial planners who highlight that keeping a mortgage can often be a more strategic financial move. Tyson Sprick, a certified financial planner with Caliber Wealth Management, states, “It usually doesn’t make a lot of sense to pay off, say, a 3% mortgage early. You could put that cash in a money market account right now and earn more than that.”

Beyond the math, there are emotional considerations at play. Many individuals feel empowered by the idea of living debt-free, but this can sometimes cloud financial judgment. “Many people find the idea of living with no debt empowering,” explained Josh Brooks, a CFP with Exponential Advisors. “It’s about financial freedom and peace of mind, more than the numbers alone.”

Financial experts point out that while being debt-free is a noble goal, it may not always be the best financial strategy. By choosing to retain their mortgage, the Owens maintain liquidity, allowing them to invest in their entrepreneurial ventures, such as Owen’s Permanent Jewelry Center, while also building stock and real estate portfolios.

Melissa Caro, a CFP based in New York City, emphasizes the flexibility that maintaining a mortgage provides. “Once you give that money away to the bank, it’s theirs; you can’t have it back,” she cautions. This means that homeowners may find themselves in difficult positions should emergencies arise, lacking immediate access to cash.

However, Sprick warns that retaining a mortgage isn’t always the ideal strategy. Homeowners with high-interest mortgages or those nearing retirement may find it beneficial to pay off their loans early. Determining the right course of action depends on individual financial situations, including the ability to manage other investments and savings goals simultaneously.

Experts agree that homeowners should focus on maintaining liquidity while also pursuing their financial objectives. If paying off a mortgage leaves someone without a safety net, it might be wise to hold off. “You have to leave yourself some liquidity,” Sprick advises.

Ultimately, the decision to pay off a mortgage or keep it is complex and varies based on individual circumstances. As Owen notes, “Our future would look very different if we had unwisely paid off our mortgage instead of using that money in what we believe are better ways.”

As this conversation around mortgages evolves, homeowners are encouraged to consult with financial professionals to tailor strategies that fit their unique financial landscapes. The landscape for mortgage management is shifting, and those who adapt may find themselves on stronger financial footing.

Stay tuned for additional insights and strategies on managing your mortgage effectively as experts continue to analyze market patterns.