Spending decisions can be emotional events. It can feel amazing to buy yourself that Bentley you’ve always wanted (one can dream), or vexatious to spend thousands repointing your crumbling chimney.

Join Matt Robison and I this week as we discuss whether paying down your mortgage is a good decision. Spoiler alert, when it comes to putting extra cash into your mortgage, why you shouldn’t is equally as compelling as why you should.

By the numbers, it almost always makes sense to put extra cash into a high yield savings account (earning 5%, generally speaking) or the market (returns of 10% or more on average, over the long-term). Why? Because the returns you receive are greater than the interest you save based on your mortgage’s rate.

But numbers aren’t everything. There are actually four ways to think about paying down your mortgage:

1. Strictly Math - What can you earn on the extra money you would put toward your mortgage vs. what you would save in interest? For example, if you have an extra $1k to put toward something, investing it in a Money Market Fund might earn you, let’s say, $50 (with a 5% return). If you put it toward your mortgage, which is charging 3% interest, you save $30. Numbers make sense.
2. Can’t Sleep at Night - “We own our house without a mortgage which is the worst financial decision we’ve ever made but the best money decision we’ve ever made…the one thing that has given us the level of independence and autonomy” - Morgan Housel, The Psychology of Money We are human. Anxieties are a part of life. Many people feel the weight of a mortgage as an anvil sitting on their shoulders. There is no discounting of emotions. Sometimes it just feels better to pay the mortgage down.
3. Relationship to Money - Our formative years made a huge impact on how we feel about money. Maybe you grew up with the mantra “debt is bad.” Or “owning your house is the truest sign of wealth.” Your relationship to money certainly plays a part in your decision to pay down your mortgage.
4. Life Event Planning - This model combines the three above. If you have a 30-year mortgage after refinancing to take advantage of those super low interest rates from a few years ago, you might be thinking “but I will retire in 15 years, I don’t want a mortgage payment then!” Planning your payoff date to coincide with a particular life event can be a great way to align your mind with your wallet.

How your mortgage makes you feel can be as important as its impact on your financial health. Tune in to hear more!

Are you ready to create your ideal lifestyle? Let’s Connect.

Learn more about Mike and my services at https://www.mortonfinancialadvice.com and connect at https://www.linkedin.com/in/mwsmorton/