Payoff Mortgage. Oh no. Never.

I alway get to explain what I think, I don't want to, but here is why one should not pay off the mortgage.

First let's ask question to yourself:

1. Are you paying of so that you can sleep well? If yes, No argument go ahead. But look for #2.
2. Are you going to invest the interest you save every month? If yes, great you might be ok.
3. Are you able to get (Mortgage Rate + (Mortgate Rate * Tax Rate / 100) return of investment? If yes you better not pay your mortgage. For example, 6% mortgage rate, 25% tax rate, you will need 7.5% return.

Now lets look into more detail.

Lets say you earn 50k a year. And your mortgage is $1000/month. Let's assume you get a raise 3% a year. That means your salary will be 100k in 24 years. So after 24 year, you pay $1000/month even though your salary is double. So basically you pay $500 of todays money.

Now let look in a different way i.e. inflation. If inflation is 3% that mean the cost of the goods you purchase will increase at the rate of 3%. That mean the thing you buy for $1 will cost you $2 after 24 years. For example, today Burrito cost $1 at Taco Bell. Lets say if we want to pay the mortgage with burrito. For simplicity lets say 1 burrito = $1000. So based on the above situation you have to give one burrito to bank today every month. After 24 years, $1 can buy half burrito. So you have to give bank half burrito and other half you eat rather than bank eat your whole burrito.

So if you keep mortgage you are paying the debt with cheaper dollar, because $1000 is not $1000 tomorrow. It will always (well most of the time unless we hit deflation) less tomorrow.

Few other reasons are some basic financial freedom rules, such as always keep money on your side, you will need if something go out of whack, e.g your health, financial debacle etc. You need money in this case and owning house wont' give you money. You can sell it, but hey you will get price at that time whether its up or down and you wont get immediately. House is not considered as a liquid asset.

Furthermore, you certainly don't want to payoff at the second half period, as you are paying interest less to the bank.

I hope it make sense.