Stuff About Money: Episode 85: Should You Pay Your Mortgage Off Early?

Debt. Some people hate it. Some people tolerate it. And when it comes to a mortgage, the debate gets even more interesting. In this episode of Stuff About Money They Didn’t Teach You in School, Erik Garcia unpacks the question that’s been on the minds of several clients this week: Should I pay off my mortgage early? With four unique client scenarios—ranging from low-interest-rate borrowers with excess cash flow to high-rate homeowners debating a refinance—Erik highlights why there’s no one-size-fits-all answer. Along the way, he shares his personal philosophy on debt (hint: not all debt is created equal) and why blindly following financial advice can sometimes backfire. As the episode unfolds, Erik explores the key factors to consider when making this decision—your interest rate, cash flow, investment potential, and, most importantly, your comfort level with risk. Sure, being mortgage-free sounds appealing, but what if paying it off means leaving yourself cash-poor? Trading your liquidity for a paid-off home might seem like the responsible move, but could it actually be a risky bet? Before you rush to throw extra payments at your mortgage, tune in to this thought-provoking conversation to ensure your financial strategy aligns with your long-term goals. Episode Highlights: Erik outlines four different client situations, each with unique mortgage rates, cash flow, and financial goals. (01:28) Erik discusses key factors to consider when deciding whether to pay off a mortgage early, including interest rates, cash flow, and investment opportunities. (04:10) Erik highlights common reasons people choose to pay off their mortgage early, such as peace of mind, retirement planning, and reduced interest costs. (07:31) Erik breaks down how interest rates impact the decision to invest extra money versus paying down a mortgage. (12:09) Erik explains the role of risk tolerance, noting that some people are comfortable investing while carrying debt, while others feel uneasy. (15:00) Erik explains how homeowners should consider future expenses, like home renovations and unexpected costs, before accelerating mortgage payments. (18:47) Erik encourages listeners to evaluate their own financial situation, use mortgage calculators, and consult a financial planner before making a decision. (21:49) Erik explains why liquidity is crucial and warns against using all available cash to pay off a mortgage too soon. (22:10) Key Quotes: “Risk tolerance and comfort with debt. Some people have the risk tolerance to invest while carrying debt. Others might feel uneasy by having a mortgage balance. So, having a conversation, a thoughtful conversation about how much debt you feel like you can tolerate is important.” - Erik Garcia, CFP®, BFA “Avoid credit card debt as much as possible, like the plague, car debt, school debt, sometimes it's unavoidable, so you want to be prudent and judicious in that.” - Erik Garcia, CFP®, BFA Resources Mentioned: Erik Garcia, CFP®, BFA Xavier Angel, CFP®, ChFC, CLTC Plan Wisely Wealth Advisors