Paying off your home’s mortgage is a homeowner’s dream come true. However, there are a few downfalls that come with paying off your mortgage that no one talks about.
You Have More Money To Invest
A mortgage is typically the most expensive item in your budget. Rightfully so, your home is your haven, shelter, and investment. After you’ve paid off your mortgage, you have to determine what you will do with the extra money. I suggest maxing out your retirement accounts. In 2022, the IRS annual max you can invest in a 401K is $20,500 and $6,000 in a IRA account. Invest at the level that you are financially comfortable with. Make sure you have a fully funded emergency fund of at least 6-9 months of living expenses. With no mortgage, your monthly living expenses will be less. In addition to your emergency fund, make sure you have other savings for things such as vacation, large purchases, and home repairs.
You Will No Longer Have an Escrow Account
Many people believe having an escrow account better than paying your homeowner’s insurance and property taxes separately. That’s me, I am “many people.” When you pay off your mortgage, you have to be prepared for the annual property tax bill and homeowner’s insurance policy. I recommend saving a set amount in a shrinking fund each month to be prepared for those expenses.
You Will Not Want to Move
Since paying off my home, the idea of moving and acquiring a new mortgage is dreadful. The idea of never having to make a mortgage or rent payment again is the best feeling in the world. Many years prior to paying off my mortgage, I considered moving into a different house. I am so happy I didn’t. I have renovated my kitchen into my dream kitchen and now have a custom California Closet. Creating my dream home is fun and affordable. Unless I win the lottery and can buy a full blown mansion, I will be living in my current home forever.
Your Credit Score May Drop
When I paid off my mortgage, I was so excited to see what my new credit score was going to be. To my surprise, my credit score dropped 39 points. Yikes!!! I wasn’t expecting that. I assumed it may have gained or dropped a few points, but not 39. A credit score is an indication of how well you manage debt. With no mortgage or auto loans on my credit, it affected my score drastically. It felt like I was being punished for paying off my mortgage and paying cash for a car. Of course with a paid off mortgage and car, I’m really not concerned about maintaining a high credit score.
No One Understands Your Joy
The saying “its lonely at the top” is true. If you come from a family or environment where people rarely pay off their mortgage, you may not have anyone to share this joyful time with. This can be disappointing, especially during our current economic crisis where people are losing their jobs and not able to buy a home. When I paid off my mortgage, I shared the news with two friends and two family members. Other than that, unless they read this blog post, they will not know my mortgage is paid off.
No Interest Tax Write Off
One of the advantages of having a home is the ability to write off the interest when you file your income tax return. Once your mortgage is paid in full, you will no longer have that interest to write off. I don’t know about you, but i’d rather have no mortgage than to have that tax write off.
You Will Want to Quit Your Job
Having a paid off mortgage makes it really hard to get up and go to work each day. You will find yourself wanting to go on more vacations, spending time with family, and enjoying life more. Unless you absolutely love your job and/or work for yourself, the idea of punching a clock daily is something you may start to regret. Paying off your mortgage is like having a large weight/burden lifted off your shoulders.
Thanks for stopping by and reading these 7 disadvantages of paying off your mortgage. Of course, although I list it as a “disadvantage” it really isn’t. I hope you found this post helpful. Please share any questions or comments in the comment section below. As always, please feel free to subscribe to this blog to stay updated on home decor ideas, organizational tips, and planning & productivity strategies.
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