For most people having a mortgage payment is a way of life and something they do not think twice about.  They view it as a necessary evil.  I would argue that you should focus on paying off your house and getting out from underneath the albatross of debt and payments.

Isn’t Your Mortgage a Good Debt?

Unfortunately a lot of people, including financial advisors, will give you the bad advice that mortgage debt is good debt.  Remember, you get a tax deduction for the interest right? 

Let’s take a look at the math here.  If you pay your bank $10,000 a year in interest and you are in the 25% tax bracket you will save $2,500 in taxes.  That a good deal isn’t it?  You will be out a net of $7,500 out of your pocket for interest.

Well, what if your mortgage was paid off and you had to pay taxes on that money instead of deducting it.  Your $10,000 in extra income would be taxed at 25% thus you would have to pay $2,500 in taxes.  We don’t want to pay taxes so having the mortgage is a good idea.  But wait, if you take the $10,000 in money you didn’t pay in interest less the $2,500 in taxes you paid, you will net $7,500 in your pocket.

To me it makes more sense to pay $2,500 in taxes rather than paying $7,500 in net interest.  It seems like a slam dunk to me.

Life Happens

To me the biggest advantage to paying off your mortgage is that life happens.  Just ignoring for a minute the possibilities of what you could do with the extra money you are not making in payments.  Think about the things that happen in life that can adversely affect your finances.

It could be a job loss, an illness, the death of a spouse, a disability; the list goes on and on.  Should one of these things happen to you, think of the peace of mind you would have if you did not have to worry about losing your home because you couldn’t make a payment.  Owning your home gives you a huge relief off your shoulders when life happens.

I have seen many instances where a job loss results in missing a house payment the next month as most people these days live paycheck to paycheck.  Being jobless and losing your home all in a few months can be devastating to both you and your family.

Start Paying Off Your Mortgage Today!

Obviously you should pay off your high interest credit card payments first, but once you have done that the first step is to start paying as much extra as you can on your mortgage right away.

Next you should refinance to a 15 year fixed rate mortgage so that at the very worst your home will be paid off in 15 years.  After that by paying a few hundred dollars a month can start you on the path of having your mortgage paid off and actually owning your own home rather than the bank in less than ten years.

Remember, life happens.  Just don’t let it happen to you.