Should You Pay Down Your Mortgage?
Brian Portnoy explains why the question is more difficult than it appears
In The Geometry of Wealth, author Brian Portnoy describes his own investments:
“We paid off our mortgage a while ago. I know the ‘spread’ on what I might have earned with that cash. I don’t care. I love not having a mortgage, and no other debt to speak of.”
Among the questions I hear as a financial planner, mortgage payoff is a frequent topic for discussion. That’s because there appears to be such a simple, mathematical answer—the spread Portnoy refers to.
But when it comes to financial decision-making, I believe there are always two answers: what the calculator says, and how you feel about it. The mortgage pay-down question is a perfect example.
The ‘spread’ calculation overlooks the reality that unexpected events can sometimes get in the way of a financial plan. And if an unexpected event impacted your cash flow, a paid-off mortgage could suddenly become more valuable than it initially appeared strictly according to the calculator.
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