There's no such thing as paying off a loan too soon, am I right?

[Money Saver 1]

So when someone says to you you're paying off your loan too soon what they really mean to say is I want you in debt because it makes me look better than you.  So, pay off your loans ASAP and look whose the shithead now

[innkeeper77]

Check out the don't pay of the mortgage club.

If the loan is low interest enough, it is essentially costing you money to pay it off instead of investing it.

[zolotiyeruki]

If you assume that you'll never have trouble getting enough income to make the monthly payments, and that investments will, over the long term, consistently return significantly greater than your interest rate, and that you'll invest the difference in payment rather than spend it, then sure, it makes mathematical sense to never pay off your mortgage.  Just cash-out refinance it every few years.  However, a job loss, or a prolonged market downturn, or a lack of self-discipline, or simply the mental benefit of being out of debt can tip the scales in favor of paying off your mortgage.

[Money Saver 1]

If you assume that you'll never have trouble getting enough income to make the monthly payments, and that investments will, over the long term, consistently return significantly greater than your interest rate, and that you'll invest the difference in payment rather than spend it, then sure, it makes mathematical sense to never pay off your mortgage.  Just cash-out refinance it every few years.  However, a job loss, or a prolonged market downturn, or a lack of self-discipline, or simply the mental benefit of being out of debt can tip the scales in favor of paying off your mortgage.

So, you're saying that getting a mortgage can actually make me money if I make the right investment.

In addition, what do you think of low cost government foreclosures, where you can win property auctions at well below market value?

[Money Saver 1]

My initial topic here concerned money loans, not property loans, but feel free to expand the topic.

[solon]

Can you give us a little context? Why were you advised not to payoff your loan?

[Kris]

My initial topic here concerned money loans, not property loans, but feel free to expand the topic.

What kind of “money loans” are you talking about? Not mortgages, apparently. Car loans?

And who says “you are paying off your loan too soon”? Random strangers? Friends? The loan officer?

Some loans have a prepayment penalty. In which case, it would be bad to pay them off too quickly. But you don’t want to take out one of those loans.

https://www.experian.com/blogs/ask-experian/how-to-avoid-paying-prepayment-penalty/

[joemandadman189]

https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153

[ixtap]

My initial topic here concerned money loans, not property loans, but feel free to expand the topic.

Actually, your initial topic was vague and had no context at all. And whether or not to pay off your loans needs context, as does who to listen to about personal finance.

Ie
-"Don't pay off that high interest loan because I wanted you to spend that money differently" is generally bad advice.

-"Don't incur capital gains to pay down that low interest loan that you had already planned to cash flow" just might be good advice.

[PDXTabs]

My initial topic here concerned money loans, not property loans, but feel free to expand the topic.

Right now inflation is running something like 6.4~7.9%. Why would you pay off any debt with an interest rate lower than that any faster than you have to?

[Money Saver 1]

My initial topic here concerned money loans, not property loans, but feel free to expand the topic.

Right now inflation is running something like 6.4~7.9%. Why would you pay off any debt with an interest rate lower than that any faster than you have to?

You incur interest charges based on time.  No matter what, less time equals less charges, so it seems logical that really, the sooner you pay it off the less fees are stacked up and the more you save.  Seems pretty damn simple.

[nereo]

My initial topic here concerned money loans, not property loans, but feel free to expand the topic.

Right now inflation is running something like 6.4~7.9%. Why would you pay off any debt with an interest rate lower than that any faster than you have to?

You incur interest charges based on time.  No matter what, less time equals less charges, so it seems logical that really, the sooner you pay it off the less fees are stacked up and the more you save.  Seems pretty damn simple.

This is a common trap people fall into when they decide to pay off debt - particularly low interest debt - faster than necessary.  Of course it will save interest, but money is fungible, so one must always ask if it is the best use of their financial resources.  Very often it is not.  This is particularly true anytime you prioritize paying off low-interest debt ahead of maximizing your tax-advantaged space.   The money you “save” in interest payments is often far less than the extra taxes you pay.

Someone already posted a link to the Investment Order, but it gives some good context and is worth a look. 

[PDXTabs]

My initial topic here concerned money loans, not property loans, but feel free to expand the topic.

Right now inflation is running something like 6.4~7.9%. Why would you pay off any debt with an interest rate lower than that any faster than you have to?

You incur interest charges based on time.  No matter what, less time equals less charges, so it seems logical that really, the sooner you pay it off the less fees are stacked up and the more you save.  Seems pretty damn simple.

The SP-500 returned an average of ~10.7% per year between 1957 and 2021. So if I can get 10.7% for investing in the SP-500, why would I pay off debt with interest rates below 6.4%?

Seems pretty damn simple to me.

[charis]

My initial topic here concerned money loans, not property loans, but feel free to expand the topic.

Right now inflation is running something like 6.4~7.9%. Why would you pay off any debt with an interest rate lower than that any faster than you have to?

You incur interest charges based on time.  No matter what, less time equals less charges, so it seems logical that really, the sooner you pay it off the less fees are stacked up and the more you save.  Seems pretty damn simple.

It is simple, but not in the way that you mean.  My 30-year mortgage is $500/month at 2.75 percent.  I could pay the whole thing off now but it's a better use of my money to invest it.

And your original post said nothing about money loans

[solon]

Don't feed trolls. This guy hasn't given us any details, and we can't advise/commiserate/sympathize.

[sonofsven]

Yes, paying off a loan is the best possible thing to do in this, the best of all possible worlds.
Have you ever read Candide, by chance?

[Tyson]

If you assume that you'll never have trouble getting enough income to make the monthly payments, and that investments will, over the long term, consistently return significantly greater than your interest rate, and that you'll invest the difference in payment rather than spend it, then sure, it makes mathematical sense to never pay off your mortgage.  Just cash-out refinance it every few years.  However, a job loss, or a prolonged market downturn, or a lack of self-discipline, or simply the mental benefit of being out of debt can tip the scales in favor of paying off your mortgage.

I agree with all your concerns.  But I come to the opposite conclusion.  It makes no sense to pay extra toward a mortgage, ever.  Because in the case of job/income loss, having that extra money liquid and accessible is MUCH safer than having that cash paid to the bank. 

To me, the safest approach is to save/invest enough so that you have giant ball of money that you can use to pay off the mortgage any time you want.  At that point you really are in control of the situation, financially.  Does it make you feel better to pay off the mortgage all at once?  Well, then go ahead.  Or if not, then you're big ball of cash will continue to grow at an accelerating rate.  At those levels of cash, even market dips are pretty much 'meh'. 

[innkeeper77]

My initial topic here concerned money loans, not property loans, but feel free to expand the topic.

Basically all loans are money loans.. a mortgage certainly is one, just a secured one.

The choices aren't pay off the loan or spend it... I'd suggest taking some time reading through the blog archive. There is some helpful stuff in there.