Paying Off Your Mortgage Early

 We did it! We paid off our mortgage... but why?

Just like the name of this blog would suggest we LOVE looking at the math behind our decisions. The problem is that there are factors that are hard to work into the math. Of course, the specific factor that I'm talking about is risk. 

As a simple example lets say you have a $200k mortgage at a 2.5% interest rate BUT, your friend tells you: "The stock market gives you ~8% returns annually. Therefore you could pocket the difference (in this case 5.5%)". With this logic why would one ever pay off their mortgage? In fact, with this logic you should take out as many loans as you possibly can and put it all in the stock market. Obviously this does not make any sense and the reason is very simply, because of risk. Now does this mean that there aren't people that have gotten rich out of pulling stunts like this? Of course there are, but what is being put on the line for a chance at said riches (or to be clear 5.5%, in the example) is often not worth the effort. To put this in a single question: Would you really risk your home for the chance at 5.5% returns? Maybe, but we did not think it was worth it. 

It's hard to put a dollar value on certain things but the security and stability of owning our own home as-well as knowing that even if one of us were to lose our jobs that we would be able to, comfortably stay in our home (along with all the benefits that come along with that) in our opinion is priceless. 

Apart from an increase in stability the other benefit we are now enjoying is a significantly lower monthly obligation. We now have an additional monthly mortgage payment that historically we wouldn't otherwise paid to the bank. We plan to aggressively invest this money into VOO & VT to rebuilt our investment portfolio outside of our 401k in order to continue to work our way to financial independence. 

Next time you are presented with a decision really ask yourself if the potential gains are worth the risk. In my personal experience growing our wealth has been a slow and boring process. Next time you come by an opportunity that seems too good to pass make sure you understand what you are risking. 

Becoming financially independent is all about taking a lot of little calculated decisions that will lead you to success.