Why your financial planner might tell you to keep the mortgage

The investing information provided on this page is for educational purposes only NerdWallet Inc does not offer advisory or brokerage services nor does it recommend or advise investors to buy or sell particular stocks securities or other investments Trinity Owen and her husband bought their four-bed three-bath home in East Concord New York in and they promptly began sending extra money toward their mortgage to pay it off early Then the couple did various simple math Related Articles Massport says business as usual at Boston Logan after Ayanna Pressley blames GOP for disruptions GMC Canyon is the King of Mid-Size Trucks Halloween is a challenge for chocolatiers as high prices bite A look at consumer prices months into the second Trump administration Starbucks halts -year sales slide but costly improvements hurt its profits They compared what their extra payments on the mortgage would save them in interest versus what that same amount invested in the stock domain could grow to in years at the average annual sphere return rate The difference shocked us says Owen who is a digital marketer We no longer pay a dime more on our mortgage even though we could pay it off from our investments more than twice over The Owens discovered something that financial planners already know Sometimes it doesn t pay to pay off a mortgage early The surprising advice Keep the debt For multiple being debt-free is the ultimate goal But aggressively paying off a low-interest home loan can truly do less for your long-term wealth than other financial moves like tackling higher-interest debt investing in the stock territory or saving for retirement It usually doesn t make a lot of sense to pay off say a mortgage early says Tyson Sprick a certified financial planner with Caliber Wealth Management in Overland Park Kansas You could put that cash in a money field account right now he says and earn more than that The perks of keeping a mortgage Carrying a mortgage has other advantages For one thing keeping cash available gives you more flexibility Melissa Caro a CFP based in New York City and founder of digital platform My Retirement Configuration reminds clients that if they pay off their mortgage all that money is tied up in the house Once you give that money away to the bank it s theirs you can t have it back Caro says If you need funds for a major repair or urgency she says you may end up borrowing again or selling investments that could trigger taxes Another plus Your mortgage interest may be deductible if you itemize on your taxes The higher your income is the more valuable that deduction is and it does make a huge difference in chosen cases Sprick says When paying it off makes sense That mentioned holding onto home debt isn t unfailingly the optimal plan If you ve got a high-interest mortgage and enough cash to pay it off early your financial planner might give you the green light It might also be advisable to work on the debt if you re nearing retirement a life stage when owning your home outright can be especially useful The question Sprick says is whether people have enough cash to pay off their mortgage and pursue other goals at the same time Are you able to attack your home loan while also putting money away for college and keeping your crisis fund intact If you can zero out the mortgage Sprick says but it leaves you with nothing left in your bank account it s better to wait You have to leave yourself specific liquidity he says The emotion of debt The wild card in all this math is that financial decisions aren t rational Money is tied to emotion and feelings of control and specific people just want their debt gone A large number of people find the idea of living with no debt empowering says Josh Brooks a CFP with Exponential Advisors in Weatherford Texas It s about financial freedom and peace of mind more than the numbers alone Still putting feelings over math might mean you earn less over time have less liquid cash and make less progress toward other financial goals There are chosen people who say I don t really care I just want it gone I just want that feeling of not owing anybody anything Sprick says From a financial standpoint it may not be the ideal move but life is more than just a spreadsheet The bottom line In the end everyone s situation is different and you have to make the best decisions for your own finances If you re unsure of the best approach talk to a financial professional The good news is that you don t have to be stressed if you re paying off a low-interest mortgage for the next insufficient decades it might be the kind of smart money move financial planners often suggest For Owen and her husband keeping their home loan has allowed them to invest in scaling her online jewelry business and also to invest in stocks and local real estate Our future would look very different if we had unwisely paid off our mortgage instead of using that money in what we believe are better avenues she says This mindset has greatly changed our perspective on paying interest for necessary purchases More From NerdWallet Evidence Blackout Leaves Fed Guessing Ahead of Rate Decision Sought on Reddit Should I Pay Off Loans or Save Are Air Traffic Controllers the Key to Ending the Shutdown Kate Ashford CSA writes for NerdWallet Email kashford nerdwallet com Twitter kateashford The article Why Your Financial Planner Might Tell You to Keep the Mortgage originally appeared on NerdWallet