The Case for Paying Off Your Mortgage (Even If 'They' Say Don't)

Hey everyone! One of the most common questions I hear from people getting close to retirement is: “Should I pay off my mortgage before I retire?”

And there’s no shortage of opinions out there. You’ll find plenty of articles and videos running the numbers and showing you charts about what’s “mathematically optimal.”

And for some reason, this topic gets people going. I don’t know why but it just does.

So today, I want to walk you through both the math argument people make but also something the numbers don’t show… and by the end, I’m hoping you’ll have a much clearer idea of what’s right for you.

The Numbers: The Case for Keeping the Mortgage

Let’s start with one of the main arguments people make for keeping a mortgage, which is you’re better off keeping the money invested in the market rather than pay off your home.

For example, if you have a mortgage rate of, say, three percent, and you think you can make six percent in the market, on paper, you’re ahead. You’re essentially borrowing at three percent and earning six — netting the difference after taxes, fees, and whatever other expenses there may be. And sure, that may work on paper.

But here’s what I want you to think about… if I asked you to take out a loan at three percent and use it to buy stocks or mutual funds, would you do it?

Because that’s exactly what’s happening when you keep a mortgage and invest the extra money. The difference is, when you borrow against your portfolio, it’s called “margin.” When you borrow against your house, it’s called a “mortgage.” But in both cases, you’re using debt to invest.

Most people I talk to say, “No way, I wouldn’t use margin — that’s risky.” But for some reason, when it’s called a mortgage, it feels completely normal.

Think about it another way — you probably wouldn’t put $300,000 on a credit card at a low interest rate and then put it in the stock market. Yet, financially speaking, it’s still leverage—it’s still debt.

And although I would never do it, leverage works great when markets go up. But when markets drop, it feels very different to have that debt hanging over you. And that’s when people get in trouble financially.

Let me give you a quick example.

Imagine you retire with a $2,000 monthly mortgage payment and a big chunk of your portfolio invested. A few months later, the market drops 25%. Suddenly, you’re looking at your investment accounts being way lower than they were — and that $2,000 payment still shows up every month, right on schedule.

Now, you might have the income to handle it. You might still be fine long-term. But emotionally, it feels very different than it did on paper. That debt starts to feel heavier. And instead of focusing on enjoying retirement, part of your energy is going toward justifying why you’re still carrying it.

And even worse, if you don’t have the cash to keep up with that payment and you’re relying on your investments to help with your home payments, well… you’re now watching your portfolio wash away — and your home along with it.

Tax Deductions

Another argument people bring up is the mortgage interest deduction. Yes, if you itemize your deductions, meaning you don’t take the standard deduction, you can deduct the interest you pay on your mortgage, up to a certain point.

But here’s the catch — you’re still paying that interest.

Think of it like this: for every dollar you give the bank in interest, you might save about twenty-five cents on your taxes. You’re still out seventy-five cents.

So yes, the deduction helps, but it doesn’t make your mortgage free. And here’s something a lot of people don’t realize — with today’s higher standard deduction, many homeowners aren’t even itemizing anymore. That means they don’t get that mortgage interest break at all, because their other deductions aren’t high enough to beat the standard deduction.

Liquidity and Flexibility

Another argument people like to mention is keeping more of your money in investments or savings rather than tying it up in your house. If you put a big lump sum into paying off your mortgage, that money is now locked in the walls of your home.

If you need it back — for a medical emergency, for a business opportunity, for helping family — the only ways to get it are to sell your house, take out a home equity loan, refinance, or any other creative ways people think of.

That’s true — keeping your mortgage does give you more liquidity on paper. But here’s the thing: liquidity only matters if you’re actually going to use it.

For most people in retirement, the goal isn’t to be actively borrowing against their house or pulling big chunks out of their investments.

And if you’re worried about emergencies, there are other ways to prepare without carrying a mortgage — like keeping a healthy emergency fund. That way, you get peace of mind without the monthly payment hanging over your head.

The Emotional Side

Now, here’s where most financial conversations stop. But this is where I think the real answer lives.

Because the numbers are important — but they’re not the whole story.

The emotional side of this decision matters just as much.

And a spreadsheet can tell you potential investment returns and tax savings, but what it’s not going to show is the value of your peace of mind that comes from owning your home outright. That feeling when you know the roof over your head is yours, no bank involved — it changes how some people feel about retirement completely.

Even so-called “good debt”, which is what some would categorize a mortgage as, can still create mental load. And there’s research showing that adults in debt — even manageable debt — tend to have higher stress levels. That stress may be subtle, but it’s there. There’s a study I pulled up on the NIH website on the topic of debt degrading mental health. And it says, “…adults in debt have elevated levels of depressive symptoms, anxiety and anger…relative to debt-free adults.” And it goes on to say, “…debt…operates as a stressor…and is associated with lower levels of adult emotional well-being.” (Source)

And so I’ll give you an example.

A client of mine — we’ll call her Susan — was 62, getting ready to retire in a couple years, and planning to buy a new home. She had plenty of investments, and she could easily afford a mortgage payment.

Mathematically, having a mortgage looked great on paper. But she told me, “I just don’t want that bill in retirement. I want to know that no matter what happens with the market, my home is mine.”

So, she bought the house in cash. Could she have made more money by investing that money instead? Maybe. But the peace of mind she got — you can’t put that on a spreadsheet.

Flipping the Question

So here’s my advice: let’s flip the question.

Instead of starting with, “What makes the most financial sense?” ask, “What do I want my retirement to feel like?”

When you picture yourself in retirement, are you more relaxed knowing you have zero debt? Or are you comfortable carrying a mortgage and the risks that come with it?

When Paying It Off Makes Sense

There are situations where paying it off makes sense.

If you can pay it off without draining your emergency fund, it can be a wonderful decision.

If it would significantly reduce your monthly expenses, make your retirement income plan more predictable, and give you peace of mind.

You don’t have to do it all at once, either. You can attack it in phases.

The most important thing is this: make the decision you want.

Too many people keep their mortgage because that’s just what they’ve always done or have been told to do. Don’t let someone’s blanket statement of “paying off your mortgage isn’t smart” stop you from writing that check. If they want a mortgage, great.

It doesn’t mean you’re making the wrong choice. You’re not. You’re making your choice.

As always, thanks for listening, and I’ll see you on the next episode.