Should I pay off my home mortgage?

Asked by Lao, Fri Sep 26, 2008

I am concerned about the economy...and many banks are going I was wondering
whether I should pay off the rest of my mortgage. What are some positives and negatives of doing this?
I can completely pay off the rest of my mortgage with the money that I have in the bank.

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Joshua Jarvis, Agent, Duluth, GA
Fri Sep 26, 2008

This is an age old question.

The good of paying it off

THE MONEY! Now your income can be yours to invest. I'm a big fan of paying off your primary residence so you can have financial freedom.

The bad

Some would argue that you can still outperform the mortgage rates on the market or in other investments, such as Tenants in Common or commercial income producing real estate.

Depends on the situation and your temperament.
1 vote
Erica Glessi…, Agent, San Jose, CA
Sun Feb 21, 2010
I've had financial advisors and "wise" people with money tell me that it is better to leverage your dollars for investments but when I asked, they all paid their home free and clear first. So I will chime in, pay off the house, then bank more funds for future investments.

0 votes
Norman Aless…, Agent, San Jose, CA
Sun Jan 17, 2010
I know that this is old but I would pay off my mortgage, because you never know when there will be unexpected expenses. I operate that way and it saves alot of mental tension.
DRE# 01397256
0 votes
William Klopp, Agent, Morgan Hill, CA
Tue Jan 5, 2010
No easy answer here:

1. If you pay off the mortgage it will allow you to utilize more of your monthly income of other investments, personal items, fun, etc...However,
2. It will reduce the purchasing power that the cash in the bank offers.

In current economic times you will need to weigh a number of factors prior to making this decision, some of which may include: job stability, is the home the mortgage is attached to in a state of decline or holding value/appreciating, is the rate of return by paying off the mortgage equal or better than you might receive investing money elsewhere, etc.

Sorry there is not a black and white answer here.
0 votes
Kathleen Sha…, Agent, Gilroy, CA
Tue Dec 16, 2008
All experts point to CASH is KING in this market. So putting more of your hard earned money into a declining asset does not seem like the best way to go. All people are different, so talk with your CPA, etc. pertaining to your situation.
0 votes
Sam Shueh, , San Jose, CA
Mon Oct 13, 2008
All Banks are FDIC backed. For example, Santa Clara Savings has been bought and sold 18 times since its inception. Bank of Morgan Hill became Bank of Italy and now it is Bank of America located a few doors away since 1900.

The options are as follows. But you need to work out all the numbers see what makes sense to you.

1. If you are retiring soon and don't have a lot of pension/income. You pay off.
2. If you have low balance left but many years to go, pay more each month,
3. If you need tax write off and have lots of equity, you take a line-of-equity(mostly no fees ) and use the money to buy a rental. Some homes are 45% off from what people paid for and are considered dirt cheap. You purchase same as 100% cash to get even a better price. The deductions are so lucrative that most income goes to your pocket. In the bay area the long term appreciation is there.

The options in other investment are few:
1. CD +3-4%
2. Stocks -15 to 25%
3. Mutual Funds -12 to 15%

Right now, I work with mostly investors who are jumping back on the RE investment. Contact me if you have questions. Sam Shueh
Century 21 Champion
0 votes
Eric H. Wong , Agent, Albany, CA
Fri Sep 26, 2008
Hi Lao;
If you have enough money to pay off your mortgage, that is something you certainly can do. It would probably be a great relief to not have to pay that monthly bill, but, before you pay it off, think carefully about how you good invest that money in a way that could bring you more wealth. By this I don't mean getting a new car, or buying things for yourself, but rather a real investment, maybe in equities, maybe in private equity groups, maybe income property. Something that will make your money grow.
Speak to a financial or estate planner first, and make a plan about where you want to be in 5 years, in 10 years, when you retire. If you can pay off your mortgage, those monies may also be a key to your future. In the end you may decide that paying off your mortgage is the smartest thing to do, but first explore what is possible, and make a plan that will carry you into a wealthier future. As bad as the economy is, there is still opportunity out there.

Good Luck
0 votes
Homa Moaddel, Agent, Foothill Ranch, CA
Fri Sep 26, 2008
Hi Lao,

I will advise you to pay off your mortgage if,
1. you have other investment(stock, retirement account..) and income,
2. You will never need to get a loan against this home,
3. you are healthy or have a good medical insurance.

I am a believer in having your home clear and free from any encumbrances(loan)! The interest you pay over the years for that money (mortgage) is larger than the tax return. And that freedom add a few years to your life!!


Broker Associates
Prudential California realty
0 votes
The Hagley G…, Agent, Pleasanton, CA
Fri Sep 26, 2008
As an investor and a Realtor, I say hang on to your money. You also have tax advantages for doing so.

We had a ton of equity in our properties with open untapped credit lines...and the banks recently have closed all of the lines....despite great credit! Lenders are gettming more conservative.

You may need liquidity.
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