[Julie]

I’d like to have the option to retire in 12 years. My mortgage is 2.25% interest rate. Starting next year, I’d like to start paying it down early so when I retire, I don’t have to worry about a mortgage.

My parents are telling me NOT to do this and that money would be better used in mutual funds.

This does make sense but I’d like to get other opinions.

[William]

NEVER pay that off. EVER. This the greatest hedge against inflation that exists and you likely will never see it that low again in your lifetime.

Think of it this way. Why would u take money to pay 2.25% when the same money could easily be making 6-8%?!?

This is THE definition of “good debt”

[Damian]

Hey there! First off, kudos to you for planning ahead for your retirement—that’s a smart move. Now, let’s talk about that mortgage. At 2.25%, it might seem like “cheap” debt, but here’s the deal:

there’s an incredible sense of freedom and security that comes from owning your home outright, especially as you step into retirement.

Your parents suggest putting that extra money into mutual funds, and while investing is important, there’s something to be said about eliminating risk.

The stock market can be unpredictable, and the last thing you want is a downturn right when you’re ready to retire.

By focusing on paying off your mortgage early, you’re guaranteeing yourself a return—in the form of peace of mind and reduced monthly expenses.

Imagine entering retirement without a mortgage payment hanging over your head. That’s a big deal!

So, my advice? Start knocking out that mortgage. You can still invest a portion of your income, but make paying off your home a priority.

Being completely debt-free will give you the financial flexibility and security to truly enjoy your retirement years.

[Jill]

Mathematically speaking, everyone in the comments is correct. That is an AMAZING interesting rate. However, I’m in the same boat as you – I will not retire until my home is paid off so I pay extra monthly on my low interest mortgage.

I recognize that this isn’t the best idea (math-wise), but I will definitely feel at ease when my only responsibility is the taxes and insurance.

If you can invest AND pay down a little bit extra each month, let er rip!

[Leslie]

I paid my property off when I was 45 and don’t regret it at all. I am debt free, my husband and I both retired early and are enjoying life!

[Heather]

Your parents are correct.
Even if you change your mind later and decide you want to pay it off in 12y, you’ll have more money to do so if you invest it now and let it grow at 7-11%(ish) rather than paying down 2.25% debt.

[Mark]

Depends. The best math answer isn’t always the best answer. Some ppl value being debt free more

[Randy]

I think your parents offer good advice. However, paying off debt is gauranteed returns. Investing in index funds come with risk of loss.

No gaurantees.

[Rob]

Not a chance I’d ever pay that off. I say this being in the same situation, 2.25%! Don’t fall for the “peace of mind” narrative!

What gives you more peace of mind?

A paid off mortgage that doesn’t generate income or an investment portfolio that generates income and grows?!?!

It’s a no-brainer!

[Rikhi]

That’s a great advice by your parents. At such a low interest rate, it doesn’t make sense to pay-off the mortgage.

Instead keep investing in index funds.

[Elizabeth]

Pay off your mortgage. I worked with many people over the years who had to work longer than they wanted to because of a mortgage.

You pay interest on a mortgage and income tax on investments (unless tax sheltered) and people only mention the money you make on investments.

They never mention the other 2 things.

[Michelle]

I’m in a similar boat. My primary mortgage is at 1.875%, and a rental at 3%. My advice? Set up an investment account (or savings account as long as the rates are so high, and call that “My House”.

Throw all the extra money in there. Consider that as the amount you could pay off, but just let it grow.

But, for example, if that account grows to match or exceed your mortgage, it’s basically like having it paid off – only better because you’re making money on that money.

[Colin]

My mortgage rate is 2.25%, same as yours. I have 12 years remaining on the loan. I wouldn’t dream of paying it off early.

If I continue on my current path I should reach FI in the next 12-15 years, and that’s factoring in the monthly expense of my mortgage payment.

If I were to redirect monthly investments to my mortgage, I’d delay my timeline to FI.

The house would be paid off, but all those monies would be locked up in home equity instead of spending the next 12-15 years growing and compounding in the market.

In much simpler terms, money I invest now will likely earn 8-12% over time, much greater than the 2.25% rate on my mortgage.

To me it’s a no brainer, the money is worth more in the market, growing and compounding.

I can’t live on the equity in my home, but I can live on the growth of my investments.

[Jimmy]

a debt is a debt. no running away from the compounded interest on it and all.

investment? if you managed to buy the like of Nivida when it’s a nobody and now you can sell off all +undeclared F.I

I was retrenched twice around the pandemic era.

as the house is fully paid off, my monthly overheads of telephone, internet, utilities, groceries and such, was very manageable within my own savings.

So, pay off the loans asap. debt free feeling, a privilege for the few wise ones.

yup. I am one of them.

[Richard]

Really not enough info to give you the best advice possible. Need to know how much you have saved/invested currently, what’s your expected expenses in 12 years, etc.

But in general, Listen to your parents but go with ETFs.

[Christopher]

You’re going to get 2 opinions:
1) pay it off early because it feels good and that’s what Dave Ramsey says.

2) don’t pay off low interest mortgage early when you can invest the extra in higher earning funds.

I’m following #2 and have a 15 yr mortgage paying the minimum, which is more than a 30 year paying the minimum. So, in a sense I’m paying it off early compared to a standard 30 year.

In the 10 years I’ve had this mortgage I’m way ahead in portfolio value minus mortgage interest vs paying down extra on the mortgage and saving on interest.

Now number 1 isn’t bad because it does feel good to be completely debt free.

And our mortgage will be paid off when I retire.
You do you.

I don’t think there is a wrong way. Just depends on personality and goals.

[Alyssa]

Listen to mom and dad.
New plan:
Open a Roth IRA if you dole have one OR a regular brokerage and invest there.

Once you reach the amount of your mortgage, pay off in lump sum.

You’ll get there faster due to the returns of the market. The S&P averages 15% vs your mortgage is 2.25.

You’ll arbitrage the difference.

Or if there is an emergency in life, you can access much easier than if was in your house.

Of course there is the option of HELOCs but you can lose your home if you can’t pay it back.

[Justin]

There is some information I don’t know, but I can only go by what I see.

I would contribute at least 15 percent of your income to your retirement account.

Any extra money after paying bills I would throw at the mortgage.

[Bassel]

2.25 is pretty cheap. Historically, the market will beat that on average. Even CDs will beat it for a while.

The income is taxed but mortgage interest is tax advantaged.

[Derik]

Ask the people that have paid off properties how much stress they have, then ask the people that have money but no paid off properties how stressed theyd be if the economy shut down, no one rented their properties or would buy them and they had to use all their capital to keep the banks of their asses.

I’m all for being debt free then using that piece of mind and excess incoming cash to invest in whatever I wanted.

But both sides have valid arguments here. Gotta do what works for you.

[Josh]

Do what YOU want. Parents should be mathematically correct but that extra return entails extra risk.

If you don’t want to worry about a mortgage, who cares what the math says?

[Luke]

Don’t pay the mortgage off. Like others have said make that extra money work for you.

Also, even after you pay your mortgage off you still owe taxes and insurance.

You never really own the house you bought since the government will always have one hand in your pocket.

[Rob]

Parents giving good advice. Invest in index or etfs and double or possibly triple your money in 12 years.

Your mortgage rate is better than inflation…

keep paying on the 2.25%.

[Lacey]

This is always an argument of math vs emotion. The right answer depends on which argument holds more value to you personally.

I am a math-bias person, as well as many on here who advocate to keep the mortgage and invest.

And there are many on here who are emotionally-bias, who advocate to pay off the mortgage for the sense of security.

But math vs emotion are two completely unmatchable logics – you can’t fairly negotiate the two.

The Math Person: “2 + 3 = 5”

The Emotion Person: “okay, I see your point, but this is how I feel about 3.”

If you want the best math and that resonates with you, keep that mortgage.

If you want the sensation of being free from encumbrance, pay off the mortgage. Which is more valuable to you?

[Josh]

Listen to your parents. Invest the difference. When you retire. You can use those socks to pay off your mortgage and have even more money left over.

[Author]

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