pay off the mortgage or not? pros and cons

[dude]

At today's rates (mine is 3.25%), a fixed mortgage payment is an excellent inflation hedge.  Assuming inflation adds up at 3%/year, 20 years from now, everything has gone up 60%, while your mortgage has remained exactly the same.  If you're investing the money you might otherwise have used to pay it off, even at a conservative 6% return, you are way ahead of the game.  I don't intend to have mine paid off.  In the worst case, my pension (which is COLA adjusted) will always be enough to cover the mortgage and more. In fact, my wife owns a house worth roughly $300k that her parents live in.  After they're gone, I've considered using that money to pay off the mortgage, but I think the smarter play there again is to invest it and continue to pay the mortgage monthly.

[Landlord2015]

Slightly different perspective here.   I think it comes down to whether you can get a better return on that money somewhere else. 

If your mortgage is under 5%, don't you think you can get a higher long-term return through a different investment vehicle?  If your mortgage is 3.5% and inflation averages at 2%, then the real cost of your mortgage is 1.5% which (in my opinion) is nothing.  Any tax deduction is just icing on the cake.

I don't own the house I live in but I have multiple rentals.  The mortgage/balance details are:

Property 1 - 5.625%, $88,700 balance
Property 2 - 5.375%, $98,600 balance
Property 3 - 4.375%, $129,400 balance
Property 4 - 4.375%, $676,500 balance

I haven't made a final decision yet but I will probably pay off Property 1 and Property 2 within the next year.  Lowest balances that also happen to be the highest interest rate.  Property 3 and Property 4 I have no plans to pay off early, the interest rate is too good.  Instead of putting money there I can get a better return somewhere else.  Either buying other rental properties or putting it in the stock market long-term.

You pay of like 200 000$+++ dollars in one year? Here I stress with blood taste in my mouth so I can make an extra mortgage payment of 20 000 euro in December 2015! That said that is NOT the only extra mortgage payment I have done this year.

I don't have even nearly so much debt as you not even near but your mortgage value is more and apparently the income. Impressive!

I don't live on rent myself.

[Bajadoc]

Going through life debt free has a certain panache that transcends monetary value.

[MDM]

Going through life debt free has a certain panache that transcends monetary value.

To some.  To others, panache is based on analysis of historical financial trends and doing what seems overly risky to others.

Both groups are comfortable with their own reasoning, and have some amounts of sympathy or disdain for those who think otherwise.

[Vee2001]

You pay of like 200 000$+++ dollars in one year? Here I stress with blood taste in my mouth so I can make an extra mortgage payment of 20 000 euro in December 2015! That said that is NOT the only extra mortgage payment I have done this year.

I don't have even nearly so much debt as you not even near but your mortgage value is more and apparently the income. Impressive!

I don't live on rent myself.

Hey dude, you already have my respect for making extra payments.  Most people I know just do the minimums for everything (mortgage, car payments, etc).  I try to talk to them about finances/planning, about half are willing to talk but the other half just immediate shut down the conversation like it's a rude thing to discuss.  I don't get it, why not pool everyone's knowledge and improve everyone's situation/future?

What I didn't mention is that I already have enough to pay the two off between my taxable investment account and checking accounts.  I need to hold onto some funds to protect from rental vacancies and repairs but what I have sitting around now is overkill.  So it's a choice between if I think investing in the stock market or paying off some of the mortgages will give me a better return.  For my mortgages over 5%, I think paying it off would give a better return than leaving the money in stocks. 

When I look at a rental property, I want it to be cash positive from the beginning.  Three of the four properties I bought were at foreclosure auctions in the middle of the latest downturn (2009-2011).  Each needed minor repairs but were soon rented.  After expenses, including a property management company, each property was generating a positive cash flow from $300 - $600 per month.

Also, I don't consider my earned income as very high.  Single in a HCOL area and my earned income is around $70k/year gross.  I get another ~$25k/year from the property rentals (not including the tax advantages and the money going towards the principal).

[Bolshevik Artizan]

broadly anecdotal and not sure if it helps but I am about to FIRE w NW of $2m of which around $775K is real estate (paid off by the time I was 35), $800000 RRSP/401(k) and the balance in cash. I wish I had left the mortgage where it was, cut down on retirement contributions and been more invested in securities as they are clearly the most liquid and profitable of the three classes. But you live and learn...

[faramund]

Going through life debt free has a certain panache that transcends monetary value.

To some.  To others, panache is based on analysis of historical financial trends and doing what seems overly risky to others.

Both groups are comfortable with their own reasoning, and have some amounts of sympathy or disdain for those who think otherwise.

I'm currently net asset positive, but only because of my house value, and retirement accounts. But ignoring those, I'm in debt.

However, in about August 2018, I should be in a position, where I could sell all the shares I have outside my retirement accounts, and pay off all my debts. I'm not at all tempted to do that - but I do have some intentions to do some sort of grand WAHOOing at that point.

[deborah]

I paid off. Firstly, when I got a mortgage, mortgages had 17.5% interest rates, so it was a completely different scenario to today. Secondly, as it was the only loan I had ever had, it got me into the habit of saving as much as I could... so it was an important step on the road to ER for me. Thirdly, these days, in Australia (with our different tax rules) paying off the mortgage generally gives you better returns than investing - you need to check your own rules especially if you are not in the US.