By Dr. James M. Dahle, WCI Founder
Thinking about paying off your mortgage early? There is an idea out there that is very common but needs to be shot down. Because it's stupid. There are many benefits of a paid off house. Those who espouse this idea simply have not thought it through. Yet I see it casually considered as an obvious truth when used in real-life conversations, on social media, and in blogs, podcasts, and books. The idea is this:
“Money in your home is being wasted, thrown away, tied up, or doing nothing.”
It is a complete and total falsehood. That money absolutely IS doing something—both before and after the home is paid off. Let's talk about what it is doing and what that is worth.
The ROI on a House Down Payment
First, let's consider a simple down payment. Classically, a down payment is 20% of the value of the home. If you put 20% down, you can get a conventional mortgage. As a general rule, these mortgages are easier to get. They have lower fees, and they have lower interest rates than mortgages where you don't put down 20%. A conventional mortgage also avoids the need for Private Mortgage Insurance (PMI), insurance the borrower must purchase to protect the lender from the borrower potentially defaulting. I know all about physician mortgages and how you can avoid PMI without having to put down 20%. I'm even aware that occasionally you can get an interest rate and terms on a physician mortgage that are comparable or even better than a conventional mortgage despite not putting down 20%. But most of the time, a down payment saves you fees, PMI, and interest.
The typical PMI cost ranges from 0.5%-2% of the original mortgage. Let's say you pay an additional 1% in upfront fees by not getting a conventional mortgage. And perhaps 0.5% more in interest. Adding it all up, let's call it 2% a year. So if you were going to put down 10% and you put down 20% instead, what is the return on that additional 10%? Let's use some real numbers and calculate them.
Let's say it's an $800,000 house. You were going to put down $80,000, but instead, you decide to put down $160,000. What is the return on that additional $80,000? Well, it allows you to save 2% * $720,000 = $14,400 a year. That $14,400/80,000 = an 18% return. Pretty nice GUARANTEED return on that money, huh? You're certainly not going to get that out of any other investment that offers a guaranteed return, like a treasury bond, CD, or insurance product. Heck, you're probably not even going to get that long term out of a non-guaranteed investment, like stocks or real estate.
Benefits of Paying Off Your Mortgage Early
You have to consider the return on home equity when the mortgage is paid off
We talked above about the beginning of the home-owning process. Now let's talk about the end, when you have the mortgage completely paid off. That $800,000 home now has no debt whatsoever. Is that home equity doing nothing? Absolutely not. It is doing one of two things, and we can look at both to try to assign a return to the home equity.
The first thing it is doing is saving you rent money. Since you own the home, you don't have to pay rent. The home provides free rent. To determine the return on that $800,000, you have to determine what comparable rent would be. That's an easy process if you can find comparable homes for rent. The numbers vary by geographic area, but it certainly would not be unusual for monthly rent to cost somewhere in the range of 0.5%-2% of the value of the home. For an $800,000 home, that would suggest a rent between $4,000-$16,000 per month. On an annual basis, that saved rent would be $4,000 x 12 = $48,000 to $16,000 x 12 = $192,000. That would suggest a return on your home equity of 6%-24%. Truthfully, the more expensive the home and the higher the cost of living in the area, the more likely you are to be on the lower end of that scale. So maybe a $100,000 home can rent for $1,500-$2,000 a month, but it's pretty hard to get $12,000-$16,000 a month out of an $800,000 home.
However, that isn't entirely accurate. Remember that there are more expenses to homeownership than just a mortgage. That homeowner is still paying maintenance, repairs, insurance, and property taxes. A useful rule of thumb for real estate investors is that 45% of rent goes toward non-mortgage expenses. Some of those expenses, such as management fees and vacancies, don't really apply. Maybe it would be OK to use 35% or 40%, but we'll just use 45% for simplicity. If you reduce that 6%-24% return by 45%, you bring the range of returns down to 3.3%-13.2%. That money is certainly not “tied up;” it's earning a significant return.
The second way to look at this is simply to compare it to the mortgage that you could have on the property. If you have a paid-off home and the going 30-year fixed mortgage rate is 2.8% (which it is as I write this) [2022], you're earning 2.8% on your money in the home. Guaranteed. That's a whole lot better than other guaranteed investments are paying these days. As I write this, a one-year treasury bond is paying 0.4%, and a one-year CD is paying 0.65%. That 2.8% looks pretty good compared to those other numbers. To be technically accurate, you might have to reduce that 2.8% a bit if you are in a tax situation that allows you to reduce your taxes with a mortgage interest deduction. But if we're going to look at after-tax numbers, you will need to apply taxes to the return of those treasury bonds and CDs, too.
What About as the Mortgage Is Being Paid Off?
In between purchase and pay-off, you have a mortgage. Paying extra toward that mortgage doesn't reduce your monthly payment; it doesn't help your cash flow at all. However, it still provides a return. What is the rate of return? Precisely the same as the mortgage rate. As the principal is paid off, that principal no longer generates interest each month. If you pay extra one month, more of your next payment will go to the principal. That means a 2.8% mortgage = a guaranteed 2.8% return.
Separate the Mortgage from the Value of the House
Why do so many people get so confused about all of that? I think a lot of people forget that the house is completely separate from the mortgage. If you put 20% down on a house, you don't own 20% of the house with the bank owning the other 80%. If the value of the house falls by 20%, you don't lose 4% of your money and the bank loses 16% of its money. You lose all 20%. Likewise, if the house goes up 20% in value, you get to keep the entire increase. You own the whole house. There just happens to be this other liability associated with it—a mortgage. The return from paying down that mortgage has nothing to do with the return on the change in value of your house. The house will go up and down in value the same whether you have a big mortgage, a small mortgage, or no mortgage at all.
Non-Recourse Mortgage States
Some people in non-recourse mortgage states (Alaska, Arizona, Washington, Utah, Idaho, Minnesota, California, North Carolina, Connecticut, North Dakota, Texas, and Oregon) feel like paying down their mortgage is putting their money at risk. Their reasoning is that if the value of their house drops dramatically, they can simply mail their keys to the lender (or better yet, quit paying and squat in the house for a few months until the lender forecloses and boots them out). Then the lender cannot come after them personally. While that is true, it's a pretty rare situation that this really works out well for the borrower. There are two reasons.
The first reason is that most of the time the value of the home doesn't fall enough that it really wipes out all of the borrower/homeowner's equity. If you put 20% down and the home appreciates 20% and you pay off another 10% of the mortgage, you might now have a 50% debt-to-income ratio. The price of the house now has to fall 50% just to wipe out your equity. It would have to fall even more for you to really “come out ahead” with this strategy and stick it to the bank. Housing prices don't fall by 50% very often. So, it's really only available to people who put down less than 20% and haven't been in the house very long at all when a huge housing correction occurs.
The second reason is that, morality and ethics aside, defaulting on your mortgage is going to ruin your credit. That will be on your credit report for the next seven years. Maybe you could get another mortgage in five years, but the point is you can't just turn around and buy another house with a mortgage. You'll be missing out on an opportunity to buy during a major housing correction/buyer's market. By the time you can buy again, it'll likely be a housing boom and a seller's market and you won't get nearly as good of a deal. But what if you are super rich and have tons of money in cash and can just buy your next house with cash? Then, you don't care what your credit score is, right? I suppose so. But consider how rare this situation is. People with that kind of wealth don't typically get that way by screwing over people who lent them money. I've interviewed a lot of millionaires on the Milestones to Millionaire podcast, and none of them got rich this way. In my experience, the same drive that causes people to save and invest enough money to get rich also seems to cause them to pay off their debts rapidly.
Finally, there is a cost to being in a non-recourse state or having a non-recourse mortgage in a state that offers both. Did you really think the lender was going to give you the same rate and fees on a non-recourse mortgage as they would on a recourse mortgage? Bankers aren't stupid. They charge a little more to make up for the occasional non-recourse default. On average, you're not coming out ahead.
Leveraging Up Your Investment Portfolio
Fine. At this point, you admit I am right. You admit that your home equity is providing you a guaranteed return at least equal to your mortgage rate. But, you argue,
“I can beat that rate with my investments. I expect a higher return from my stock index funds and real estate than 2.8%. If I can't beat that over the long term, I will have much bigger problems than my home equity being tied up.”
You may be entirely right. Naturally, once you pay taxes and adjust for risk, the difference will not be as big as you might think. But you are still likely to come out ahead over the long run. As a leveraged portfolio goes, borrowing against your home is a pretty good way to do it. You get long-term, fixed, non-callable debt at a pretty low rate. That will usually beat your credit cards, your broker's margin loans, and even dragging out your student loans. You simply need to decide whether that leverage risk is a risk you need to run (and for how long you need to run it) to meet your financial goals.
You should also take a look at your investment portfolio. If you're deliberately dragging out a 2.8% mortgage to leverage up your portfolio and your portfolio is composed of 40% bonds paying 2%, that's probably not going to work out nearly as well as you think. Paying 2.8% to make 2% is not a winning strategy. The more conservatively you invest, the better off you are paying off that mortgage.
As you can see, your home equity is not “tied up.” It is performing a very useful service, saving you rent and earning you a return. Is there an opportunity cost to only earning a relatively low, but guaranteed return? Of course, but it's probably not nearly as high as you think once you adjust for risk and taxes. We paid our mortgage off in 2017 and have yet to regret it. If we ever did, we could always go out and get another one. Don't even get me started on the psychological benefits of not owing money to anyone; being able to use your cash flow for whatever you want; and knowing that, even in a worst-case scenario, your family will still have a roof over their heads. The fact that almost nobody with a paid-off mortgage ever does that should tell you something.
What do you think? How do you calculate the return on your home equity? How do you decide whether to leave the equity in your home or use it elsewhere? Comment below!
This makes sense. How does the calculus change when you’re deciding whether to pay off rental properties v. your home? Our rental properties (3 SFRs) have higher interest rates, (4- 4.5%) than our home, 2.8%. But the loan amount on our home is more than double the amounts on the rentals. We are aggressively paying off one rental with a high interest rate. It’s close by so we could move into it in a worst case scenario. When it’s paid off soon, we are stuck on whether to put the extra money towards paying off our home or another one of the rentals.
The math works pretty much the same way, except instead of saved rent you’re getting paid rent.
I think this is purely an opportunity cost argument, easiest decided by real interest rate comparisons. ROI seems like a theoretical consideration, but you aren’t actually receiving that return. True ROI can only be determined when you sell the home.
You’re making the classic mistake of blending the mortgage and the house together. They’re two separate things. You can only determine the ROI on the house when you sell. But you can determine the ROI on the mortgage without selling.
AUM-paid “Advisors” are strongly dis-incentivized recommending paying off a mortgage. Keep this in mind if you’re in this situation.
They can be disincentivized from recommending paying off student loans, putting a larger down payment down, and investing in anything that they’re not managing too. It’s my second least favorite way to pay for advice.
Could not agree more with this post. Paying off mortgage is a surrogate for fixed income in my portfolio.
The only thing I would add is that some mortgages can be “recast” if you provide an additional payment of a certain size, usually up to once a year. This allows you to improve cash flow by reducing the monthly payment while keeping the duration and rate of the mortgage unchanged.
Hard to say if you will come ahead (inflation vs opportunity cost) but the difference would be small. The psychological aspect can be huge. I did it 3 times and never regretted it.
Lenders usually make it somewhat difficult for borrowers, no clear instructions online and you may have to mail in a check with a letter request instead of simply making an additional payment online.
I love this analysis, spoken like a boss! It is an opportunity cost but one that many people have not thought through and think of almost opposite how they should. This analysis gives really great insights, thank you for all you do Jim.
I forgot who it was, but one of the personal finance commentators (one of the good guys), mentioned that a fixed rate mortgage can also be thought of as a hedge against inflation.
It doesn’t discount anything WCI mentioned above, but maybe it can be thought of as some insurance against inflation?
In which case, for me, it would be one of the factors to not necessarily pay off the mortgage early.
Of course no one can predict how inflation will be in the short and long term (hence it would be more like a hedge).
Absolutely agree. Low rate, fixed debt is a great inflation hedge. Nothing like paying back debt with increasingly less valuable dollars.
Note that this post is not telling you to pay off your mortgage instead of investing. It’s explaining how to think about the mortgage so you can make an informed decision.
I am always a sucker for any article related to paying down your mortgage early. It has to be the #1 most discussed and debated topic on personal finance forums.
In this take on it, Jim is debunking the myth that “money in your home is being wasted”, and he is right. I did not need PMI for my last mortgages, but that analysis on the ROI of putting down 20% should be noted by those who will consider a smaller down payment.
I still love reading on this topic – paying down your mortgage early vs investing are both correct answers IMO, depending on your circumstances for risk and time horizon. For the record, I am 9 years from retirement, carry two mortgages, and invest heavily in my mortgage “pay-down” side fund. That approach has rewarded me nicely over the past decade.
Very nice post. I’m in the camp that the psychological benefit outweighs the financial benefit so would like to work to pay off mortgage even though it is the incorrect purely financial decision to do so.
Do you recommend sending extra principal payments as you go along or starting a side fund in taxable that is the payoff the mortgage fund?
In TX the money in the home is protected from creditors so I think that is what I will do.
I could see investing a side fund, but I worry about the tax bomb that would create to pay off mortgage when it’s time to cash out to send to the bank.
Thoughts? Thanks for your time.
See my post below…I also reside in Texas.
I did a little of both, but in the end mostly just made big extra payments occasionally when I had the cash.
Great post and very thoughtful analysis. The numbers you crunch provide convincing evidence. Thanks so much for all you do, Jim!
This was an internal debate I had with myself for a long time (and on this website multiple times). Pay off the mortgage or invest more.
For a long time I went with the “rational” approach to invest more and just let the mortgage ride. Eventually I decided to go with the “reasonable” approach and just pay off the damn thing. From a mathematical standpoint it was likely still the wrong answer.
But it sure did “feel” damn good when the house was paid off. It felt even better when 3 years later COVID hit in March of 2020 and my practice shut down. Even though I had a prospect of zero income for an unknown time frame, I had literally zero worries. Enough money in the bank to live for a long long time…and no mortgage/rent payment to make every month. Having the mortgage paid off for that was more than worth the mathematical loss.
We are selling our “big house” and moving to the “retirement house”. I may end up with $300K in hand.
The retirement home mortgage payment at 2.5% is about $900. If I pay it off, I cant invest this $300K as I owe $220K on the retirement home.
With a group of investments on YieldStreet…or other real estate, I could “yield” 5-6% and grow the investment principle.
Of course there is no guarantee that these type of investments in multi-family residential projects yield and grow exactly as they propose in the prospectus.
I suppose a 2.5% “safe return bet” is to pay it off. I may not get a fully safe yield on $300K that is better than about 2% at present.
It’s an interesting thing to ponder. The $300K windfall in the home sale will not happen again.
I suppose it varies person to person what the best plan is. Being totally debt free would be nice. My overall expenses would drop to regular living and travel expenses, property taxes, and healthcare.
You’re mixing the home and the mortgage together. Don’t do that and it’ll be easier to understand what’s really going on with each.
The retirement house and land is worth about $500K. I owe about $220K on the mortgage.
The current main home will sell this summer and put $300K in my hand.
After we move, my wages drop…a lot as I go down to part time. We won’t likely itemize in 2023, so no interest deduction going forward, not that that’s a deal anyway.
If I invest the $300K, I think I could get about 5% yield, so $15K. The mortgage payment for the year is $11,000. The 300K pays the mortgage plus extra as long as it’s invested.
And as long as the investments pay off. You get 3% (or whatever) guaranteed paying off the mortgage. The 5% isn’t guaranteed. The difference is what you’re (probably) going to earn for taking on that risk. But no guarantee you actually earn it.
I’ve recently been paying down my mortgage in chunks, but only when I don’t have anything better to spend my money on. All tax-advantages accounts (eg. 401k, IRA, HSA, 529) get filled first before making any extra mortgage payments.
This year, I’m thinking I should also buy my max (20k) of I-bonds before hitting my mortgage. I’ve never purchased I-bonds before but… thoughts?
That’s pretty much what we did. We never put a dime extra toward it until we had maxed out all our tax advantaged accounts. Seemed a good balance.
Whether you throw I bonds into that mix or not is a personal decision. No right or wrong answer.
To me, it’s less of a financial decision and more of a sleep-at-night decision. My husband’s company was on the verge of collapse a few years ago and we quickly realized that having fewer payments on things is king. The sooner the house is paid off, the sooner we don’t have to worry about making that monthly payment in the case of one of us losing our jobs.
I think you are forgetting to take mortgage interest deduction into account. Living in a HCOL state with a high state income tax, being able to deduct mortgage interest from both federal and state taxes definitely changes the equation.
I mentioned it in the post. Use the after-tax mortgage rate for your calculations.
Very helpful insight. Just to clarify: Does home equity ever count in one’s investment asset allocation when we are considering 60/20/20 splits with stocks/bonds/real estate?
+1 to this question. Does home equity in our primary or vacation home count in asset allocation?
No. Your retirement asset allocation doesn’t include assets that aren’t used to pay for retirement.
Thanks for adding the word “retirement” to asset allocation. That focuses the purpose of those funds. So, then slight variation on the question: I have a vacation home, not a rental property- just a consumption item in my mind. But it has added $1M in market appreciation in 7 years. I know Zillow equity only means so much. But if this is part of my net worth, how should I view it in overall asset allocation? I don’t plan to have two homes in retirement.
If you sell it and put the money in your retirement asset allocation (or soon will), then go ahead and count it. But for now, it’s a consumption item. Like my renovation.
It’s part of your net worth, but not your retirement nest egg. What asset allocation are you talking about? I have one for every goal- college, retirement etc.
Yes I was talking about my retirement nest egg. Your explanation makes sense. Seems that it comes down to what role the equity plays in retirement. Not what it’s doing now.
This math seems wrong:
“What is the return on that additional $80,000? Well, it allows you to save 2% * $720,000 = $14,400 a year. That $14,400/80,000 = an 18% return.”
The return on the extra $80k would be 2% of $80k or $1600.
Your annual interest payment would go from $720k * 2% to $640k * 2% or from $14400 to $12800.
Am I missing something?
Yes, you’re missing the fact that putting down more money saves you interest on the $720K.
Yes, but as written, I think you describe it as negating the interest on the entire mortgage, but in annual terms, you are really just saving the 2% on the extra 80k, you still owe interest on the remaining principal. r total interest savings from the extra down payment (assuming rate is the same, to simplify) would just be 2% of 80k * the duration of mortgage paydown.
What I’m saying is that by putting a little more down, you might save significant interest on the rest of the mortgage. Even 2% is possible.
Your analysis is faulty.
I think the way to think about this is to consider case #1, where you put down $80K and then see how much principal reduction there is in a year of payments.
In case #2, look and see how much principal reduction there is after a year of payments with $160K of downpayment.
Subtract the smaller from the larger amount of principal reduction and put that value over $80K. That shows you the rate of return on the 80$ investment.
And what was the difference between my method and yours when you did the calculation?
Plugging some numbers into an amortization calculator, it doesn’t work out the way you think @Peter Shea, the overall payment is lower, so over the first year you pay down $13.8k principal and $17.7k interest with $160k downpayment vs higher “principal pay down” of $15.5k and higher interest payment of $19.9k over that first year with only an $80k downpayment.
Looking at it another way, total interest paid over course of the mortgage is $345k for an $80k downpayment vs $306k for the $160k downpayment. That saves you $39k in interest over the 30 year life of the loan or 1.6% per year on the extra $80k you put down upfront.
Either way, it seems very wrong to state that it’s a guaranteed 18% return on your additional $80k downpayment as it is in the article. Overall it’s a good article, just that one paragraph feels misleading to me.
R- the extra 2% is an increase in the interest rate (0.5% or so) and the cost of PMI(1-1.5% or so) on the entire loan. So indeed paying the extra 10%, $80K here, saves an extra 1.5-2% on the entire loan amount.
I’ve always wondered if the guaranteed rate of paying off a mortgage early decreases as you get towards the end of the term. In other words, if you have a 15 year 2.5% fixed mortgage, are you getting less than a 2.5% “guaranteed return” when you pay off the mortgage early in year 10 of the loan because the amortization schedule results in more interest being paid off in the first few years? Towards the end of the mortgage, you are mostly just paying off principal anyways, right?
No. Same interest rate. Same return from paying it down.
Going back to the rental, does the fact that you get to deduct the interest from the rental income play into it more compared to your home? Different situation, military doc with a home rental with a mortgage refinanced at 1.5% last summer, 15 yr. But it is likely the home we will move back into once we stop moving around for Uncle Sam. I have been debating if paying it down faster makes sense while the interest reduces taxes on the rental income, invest elsewhere to pay it down faster when we move back in. Currently have been making extra payments.
Just compare the after tax return. And perhaps also the consequences of foreclosure.
Great, well constructed, and important argument as always. Thx, Jim. We love our paid off mortgage and being debt free.
It’s a little bit of a status symbol in these parts too isn’t it? You’re basically saying, “I’m rich enough to not need to leverage my house to reach my financial goals.”
Comment about PMI – I’m not sure what the landscape is now but in 2016 I was able to put 5% down for a 30 year fixed rate 3.65% conventional mortgage. Clearly not ideal with PMI but it allowed us to get the house when we needed it. Fast forward 3-4 years and our monthly payments plus the elevated housing prices resulted in a much higher equity in the home. Paying biweekly also made a bigger dent in principle without a bigger payment. So we got a new appraisal and recharacterized the loan to a fixed 2.5% fixed 15-year with 27% equity and no PMI. Shout out to my credit union for only charging $1k and not requiring a new loan.
Sorry, but not paying 2.8% in imaginary interest isn’t a guaranteed return. It isn’t a return at all since you’re not receiving any money. If you think the return should be based against current mortgage rates, why not pick someone with crappy credit who might pay 6%? Boom – just doubled my housing returns!!
I’ve never really understand the endless arguments on this topic. Your home represents negative cashflow whether it’s entirely paid off or 100% financed. Bills for property taxes, insurance, maintenance and utilities still show up after the mortgage is paid. If you can comfortably pay off the mortgage and have enough cash to cover any imaginable expense down the road, go ahead and pay it off. Being completely free of personal debt is definitely worth something.
Anyone retired or financially independent with a large enough portfolio should own a mortgage free home. For everyone else, the wrong answer is thinking it makes sense and ending up house poor in desperate need of cash two or three years later.
I have no qualms holding onto a 30Y mortgage on our home at 2.875% interest. We could take ~$460k from our taxable account and pay the mortgage off in full, today, but we think this is a very poor financial move.
The 10 year cost of holding the mortgage is somewhere around $120,000 in interest paid.
The 10 year opportunity cost losing $460k in VTI shares is somewhere around $846,000 by my assumptions.
That’s a massive difference.
The government is effectively subsidizing 30Y mortgages for Americans. Why not take advantage? It’s also a great way to protect yourself from inflation if you’re worried about that.
Other factors:
We also have no intention of staying in this home long term.
I also feel much more comfortable being liquid with a very large taxable account should any large expenses come about. We will never feel cash flow pinched if there’s a temporary job loss or accounting issue with the practice. If you want to not sell shares and take capital gains, it’s also very easy to borrow against the portfolio for extremely low interest rates (<1%) and get the money same day.
I do agree that in retirement having no mortgage makes sense to keep taxable income from capital gains as low as possible.
Great reply. Liquidity and availability of funds is a great advantage of not paying down the mortgage and keeping the money invested.
But how can you get <1% interest rate on a margin loan? Ibkr given you 1.58% and it’s the cheapest option as far as I know.
The psychological benefit of paying off a mortgage is, as with all things psychological, subjective. I have a low-rate mortgage I’m in no hurry to pay off in part because I have an old whole life insurance policy (I know, I know) that would pay it off if I were hit with a bus. I’m not at all arguing for that type of insurance, but just that it all depends on how you see the mortgage debt.
I think there are some faulty assumptions. Based on an amortization table on a 30y 3% mortgage, 50% of the total interest over the lifetime of the loan will be paid in the first decade, 30% in 2nd decade, and 20% in the last decade. Making a lump sum payment at the beginning of the loan will net you a greater savings in interest immediately (>100% of your lump sum saved). If you were to theoretically sell a home in 10 years, either completely paid off or just making the monthly payments, you would need to sell a home for 12% over paid price to break even (interest paid + principal) versus 21% respectively. In addition, assuming one buys another home for the exact same price, you would still owe the remaining amount of the mortgage and interest on a new mortgage for the next 15/30 yrs. I think it is not technically correct to say you are only saving 3%, especially in the earlier portion of the loan since the majority of the monthly mortgage payment is going to interest. Said another way, if you make a lump sum payment worth 2 months of the principal payment, you have effectively immediately erased 2 months of interest.
I’m sorry, that’s not the way it works. Your rate of return is the interest rate, whether in year 1 or year 29. Everything else you said is true though.
Thank you, Dr. Dahle, for all you have done to help my wife and I learn how to improve our finances (e.g. left a fee-based adviser, moved everything to Vanguard, drafted a financial plan and shared it with our low-cost advisor at Vanguard). We had built a dream ranch in TX on raw land but saw costs go very much higher than predicted. We held on for almost 6 years but I realized that at 75 I was not ever going to be able to stop working, so last year sold it and downsized to a much smaller home and find ourselves debt-free for the first time since I was 19 years old. That feels great, but our accountant just told me that due to losing our mortgage deduction for 2021 (we paid cash), we could not itemize. So we have a fairly large tax bill due to the loss of our tithe deduction, and we are now living on SS benefits and RMD’s. Another lesson!
Thank you again and we will continue to learn.
You could always use all that money that you were putting toward mortgage interest and give it to charity and the deduction will be the same as before. 🙂