Thanks to reader feedback, I realized one financial move that was not included in my top financial moves to relieve stress list, was paying off your home.
Even though I thought long and hard about what to put on the list, paying off your home didn’t get a dedicated bullet point, just an add-on.
For those who are intent on paying off your home ASAP, let me share some perspective from someone who has paid off two mortgages and still own the properties today.
Experiences Of Paying Off Your Home
We all have different opinions, experiences, and biases. These differences are why I enjoy reading about various perspectives. Here is the feedback from two readers who paid off their homes.
I think paying off the primary residence mortgage would easily be my #1. If the mortgage is paid off and you die prematurely, the spouse and children won’t ever be forced to downsize to afford shelter. Further, the emotional trauma from your death won’t be compounded by having to move to a lesser home and neighborhood as well.
In this situation, the kids are likely getting uprooted to a new school system and then lose contact with all their friends as well. That’s way too much trauma. It can be avoided if there is no mortgage payment.
– CMAC
Number 1 for me was paying off my house. Nothing financially has relieved more stress and provided more happiness.
Number 2 paying off my business credit line.
Number 3 paying off my business.
Number 4 doing a will and trust
Number 5 paying cash for my daughter’s college
– Bill
Why Paying Off A Home May Not Bring You Stress Relief
I’ve personally paid off a vacation property rental, a rental that used to be my primary residence, and purchased a primary residence with cash.
The feedback from the two readers made me question why I didn’t give “paying off a home” a dedicated bullet point in my post. In fact, before I read these two comments, I had forgotten I had ever lived in a paid off home between 2019 – 2020!
Here are the reasons why paying off a home might feel disappointing after.
1) Ongoing property taxes
Even if you pay off your mortgage, you will still have to pay property taxes forever. If you don’t, your house will eventually be repossessed.
For example, the fixer I bought in 2019 for cash has an annual property tax bill of ~$23,000. Half the amount comes due on December 10 and the other half comes due on April 10. Every property tax notification I receive reduces my joy of having a paid off home.
Then when I read about corruption at the San Francisco Department of Building Inspection and the city wanting to fine homeowners for putting up tiny library houses, I get annoyed. There are bigger issues the city should be focusing on.
When you invest in private real estate funds, you still pay ongoing property taxes. However, the costs are just a number embedded in a spreadsheet dealt with by other people. Therefore, there is no property tax or maintenance stress. All you care about are the net returns as you sit back and enjoy life.
Check out Fundrise, my favorite private real estate investment platform. Fundrise manages over $3.5 billion and has over 400,000 investors. The funds investments primarily in residential real estate in the Sunbelt, where valuations are lower and net rental yields are higher.
2) Ongoing maintenance issues
Every time there is a maintenance issue, my stress level goes up, not down. A fixer that took two-and-a-half years to remodel has already experienced a cracked kitchen pipe, a blown down fence, and a mysterious fire alarm, which was hilariously resolved.
I will eventually also have to spend ~$18,000 to replace its roof and another $3,000 to replace the upstairs furnace. Upkeep is all part of owning physical property.
I’ve only been in my primary residence since 2020. However, I’ve already had to replace a door handle, several rotted wooden deck planks, and fix a leak during a torrential downpour. More maintenance issues will inevitably appear over time.
3) Negative real mortgage interest rates
Although I’ve never regretted paying off a mortgage early, paying down a negative real interest rate mortgage is not an optimal financial move. The higher the negative real interest rate, the worse it feels paying off a home.
For example, I’ve got a 2.125% interest rate on my primary mortgage. With risk-free investments paying 5%+, there is no way I’m actively paying down extra principal at this time. It gives me more stress relief to arbitrage the difference and live for free!
However, if my mortgage rate was at 6% and I could only earn a risk-free return of 2%, the paying down a mortgage early would absolutely provide stress relief. But you’ve…
Read More: Paying Off Your Home May Not Provide The Joy You Expect