Should You Get or Pay Off a Home Mortgage?

Laura covers five main advantages of having a mortgage, plus when it pays to wait for one. You'll find out whether you should pay off a mortgage early and how much debt you should have to maintain a healthy financial life.

Laura Adams, MBA
9-minute read
Episode #431

Should You Get or Pay Off a Home Mortgage?One of the most hotly debated topics in personal finance is whether you should be totally debt free or not. While some people are hell-bent on getting rid of any type of debt faster than a hot potato, others tout its advantages, particularly for mortgages.

In this post, I’ll cover five main advantages of having a mortgage and when to wait for one. You'll find out whether it's a good idea to pay off a mortgage ahead of schedule and how much debt you should have to maintain a healthy financial life.

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Should You Be Debt Free?

Debt is a complex topic because some experts insist that no amount of debt is acceptable—even a home mortgage. Others say that financing a home is okay, but borrowing for a car or making purchases on a credit card is a financial mistake. And another camp thinks that just about any type of debt is acceptable, as long as you can afford the payments.

My stance is that controlling your debt is an important part of being financially healthy, no matter your age or stage of life. The type and total amount of debt you can handle depends on your unique goals and the bigger picture of your financial life.

There’s no doubt that having no debt can feel liberating. In an ideal world, no one would need to borrow because we could afford anything. But as you know, paying cash for big-ticket items isn’t always possible. And in some cases, using debt can actually be a smarter financial move than spending your cash.

You might be thinking how can debt ever be good? Well, debt that creates wealth or the potential to earn more money is incredibly valuable. It might allow you to finance a home that rises in value, manage your cash flow, get an education, or even start your own business. An inexpensive loan that comes with money-saving tax breaks is a powerful financial tool.

On the flip side, expensive debt that’s used to purchase consumer goods or services that depreciate quickly (like cars and electronics) or have absolutely no value (like clothes, dining out, and vacations) cause you to lose wealth, instead of build it.

For instance, if you charge $1,000 on a credit card with 25% APR (annual percentage rate) and pay it off in three years, the total you’ll pay with interest is over $1,500. You probably purchased something that you didn’t really need—and also paid 50% more for it! Not a wise move.

So you can’t lump all debt together and reject it wholesale. Don’t get so obsessed about eliminating inexpensive debt that you lose sight of how it can help you create wealth. That’s like not seeing the forest for the trees.

In other words, put debt in its proper perspective. Your ultimate financial goal should be to create wealth, not to simply eliminate all debt.

See also: 8 Financial Truths That Can Change Your Life


About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.