- The Borrow Smart Chronicles
- Posts
- Reasons to Not Pay Off Debt
“What can be added to the happiness of a man who is in health, out of debt, and has a clear conscience?”
We do have to ask ourselves if having debt is the same as using debt? We define debt as money you can’t repay from current savings. Debt you can repay from current savings is an investment, not a debt, but let’s be real—numbers don’t lie, but your emotions might.
Just because paying off your mortgage early feels smart doesn’t mean it is. The only way to know what actually builds wealth is to run the math. And with a mortgage, the three numbers that matter most are:
Your interest rate,
Your remaining loan term, and
How much extra are you planning to send in?
Once you’ve got those, here’s what the math usually tells you:
Got a 3% mortgage? That’s cheap money. Any extra you pay toward it only earns you 3%—but if you could instead invest that money and earn 7% (say in a broad-market index fund), you're better off letting the mortgage ride and investing the difference.
Paying $200 extra each month on a 30-year loan at 5% might help you shave off around 8½ years and avoid about $54,000 in interest. Sounds great, right? But if you put that same $200 into a retirement account earning 7%? That could grow to around $244,000 over 30 years. That’s apples and oranges, but it might be more important to focus on the bigger, longer-term savings goals so you have additional liquidity when you need it.
If you refinance from 7% down to 5% and restart your loan that only has 20 years remaining at 30 years, yes, your monthly payment drops. But unless you keep paying the old, higher amount toward the new amount, you’ve just signed up to pay interest for another 10 years. And that could cost more over time.
Bottom line? Without running the numbers, you're just guessing—and guesswork can be expensive. Borrowing Smart means being willing to do the math, even when the emotional choice feels better. Wealth doesn’t come from feelings. It comes from decisions backed by numbers. That said, feelings and emotions are essential too!
We’re creating an amazing suite of simple calculators that explain these financial concepts to a client:
a BORROW SMART CONCEPT
Emotional Reasons to Not Pay Off Debt
Even if the Math says to…
1. Peace-of-mind / sleep-at-night
“No monthly payment” feels like a safety net.
Reality-check: Make sure you still have 3-6 months of liquid expenses after the extra principal is sent. Once the money is inside the house, you cannot eat the equity.
2. Psychological aversion to any debt
Some people hate being in debt more than they enjoy earning a higher return elsewhere.
Reality-check: If the feeling is genuine and long-lasting, the “premium” you pay for that comfort is the difference between your mortgage rate and the risk-free return you give up. Know the price tag and decide consciously.
3. Career or life-style flexibility
Lower fixed expenses can let you downshift, start a business, take a sabbatical, or retire earlier.
Reality-check: Will the lower payment actually change your behavior? If you still need the same income for health insurance, kids’ tuition, etc., the flexibility may be imaginary. Couldn’t you pay for your mortgage from your higher savings?
4. Forced savings for people who won’t invest otherwise
Pre-paying is better than letting cash sit in 0.3 % checking or being spent on depreciating toys.
Reality-check: Automate an investment contribution first; only if you keep raiding the brokerage account should you revert to the “momentum method” of pre-paying the house.
5. Marital harmony
One spouse hates investing in “risky” markets; the other hates debt. Pre-paying is the compromise that prevents money fights.
Reality-check: Agree on a cap (e.g., 10 % of net worth in extra equity) so the more growth-oriented partner still has room to invest.
6. Estate simplicity for heirs
A paid-off house is easier for adult children to dispose of than a leveraged rental with a lender involved.
Reality-check: If the heirs plan to sell anyway, the mortgage dies with the estate; the simplicity gain is small unless the loan is underwater.
7. Defense against lawsuit or asset-risk
In a few states (e.g., Florida, Texas) homestead equity is better protected from creditors than brokerage assets.
Reality-check: Confirm your state’s homestead exemption limits and your actual lawsuit exposure; most white-collar workers are low-risk.
8. Civic or philosophical stance
“I don’t want to be a debtor to big banks.”
Reality-check: Be consistent—are you also boycotting credit cards, car loans, and margin accounts? If not, the gesture is symbolic.
Rule of thumb
Run the pure-math scenario first so you know the size of the financial concession you are making. Then, if the non-financial reason still outweighs that dollar figure—and you retain adequate liquidity and retirement funding—pay the mortgage early with no regrets.
LIABILITIES
What’s Happening?
rates still trending toward that magical 5% threshold
prices are now the biggest problem, while housing still largest expense
this is my big concern for real estate, but a tailwind for lending - job stress creates a political environment for much lower interest rates
so true - 1% better each week….
Not Playing Win/Win!
REAL ESTATE
What’s Happening?
per Mike Zacardi and Core Logic we are back to neutral
and rents are coming down
while vacancy is still rising to that prior average 7% rate
average days on market, slower in the south
what advice would you give, and why?
ASSETS
What’s Happening?
starting to feel like we are toping toward year end for down then back up move…
WOW!
Getting closer to average melt up!
moving to more cash for me…
those with money happy!
those without less happy!
very underallocated to bonds and cash for most investors
ON BEING HUMAN
What’s Worth Sharing?
good
we are becoming more reliant on AI for AdvIce
DOPAMEMES
And Other Happy Moments…
"I avoid looking forward or backward, and try to keep looking upward." Charlotte Bronte
Was this email forwarded to you? Sign up here.
