As I wrote about in my last post, a mortgage is a debt that must be paid within a prescribed and agreed-upon time frame. And as with all debts, it often hangs as a giant dark cloud over your overall personal finances, an anchor that holds you back from achieving all of your other financial goals.

Or that’s the way I used to think about it…

I’ve had a love-hate relationship with my home ownership experience these past 13+ years. To quickly recap:

  1. I was in a rush to buy a place during the hot housing market of 2006.
  2. Sudden market crash and ensuing economic downturn
  3. I spent several years either unemployed or underemployed, living out of state, just barely keeping my mortgage current.
  4. A chance encounter on a vacation trip to Florida (to stay in my house) led to a job offer that allowed me to move back into my house.
  5. I’ve been back here for nearly 8 years since that job offer came through for me.

For the past couple years, I have been making irregular extra principal payments towards my mortgage, in an effort to pay it off more quickly. Then in December 2018, I tweeted:

By March 13, 2019, I was on the Fire Drill podcast voicing my intention that I had tweeted to the world in December. I was going to pay off the mortgage in 7 more years, a little before my mortgage turned 20 years old, and right as I was turning 43 myself. But some of the other guests on that episode talked about keeping the mortgage around and investing the difference. I was intrigued. I started to do some research on the prevailing rates at the time, which were low, but not all-time lows like we had seen a few years ago.

But when *he who shall not be named* started threatening trade wars with China and Mexico, interest rates began to drop quickly. By the end of June 2019, I stumbled upon the prevailing rates from my credit union, and found that I could get a 3.125% rate on a 15-year fixed mortgage, and even pull out a small amount of cash from my equity. <– do you see that, Dear Reader? I had equity for the first time in my 13 years of being a homeowner! Now I wanted to recapture that cash and put it to work for me in my investments.

I’m currently less than 48 hours away from the closing table on my refinance. The process has taken about 7 weeks, due to other homeowners making a mad dash for the refinancing table to lock in these low rates. If my process had taken another week, I could have jumped on an even lower rate (2.875%) that came out as a result of the Fed’s recent ¼ point rate cut.

administration agreement banking blur
Signing my life away, but digitally this time. Photo by Matthias Zomer on

The process was a little underwhelming, but thankfully most of it was handled digitally. I even signed most of the initial documents on my smartphone, while in the parking lot of a Pizza Hut. That detail isn’t important, but kinda fun 😊

My appraisal came back at $103,000, which was disappointing considering that I paid $175,000 in April 2006. For funsies (AKA to torture myself), I used an inflation calculator and put $175,000 worth of 2006 dollars in to see what that amount would be worth today if my house had only kept up with inflation. Answer: $222,346. Which makes my $103,000 appraisal even more sad. It’s worth less than half of what it could be expected to be worth, based on keeping up with inflation.

I’ve also had an Adjustable Rate Mortgage for these past 13 years and 3 months, so it will be nice to get a 15-year fixed rate. I have been lucky that in the rate environment we’ve been in the past decade or so, my rate started at 4.75% and has only dropped down to the rate floor of 4%, where it has been since 2009. But gone are my worries about rates starting to creep back up and wrecking any progress I’ve made with my mortgage paydown. I’ll have a low fixed rate for the next decade and a half, and I don’t plan to make even 1 dime worth of extra payments. The 3.125% fixed rate is barely above the long-term rate of inflation, and probably the cheapest money I will be able to borrow for the rest of my life! I don’t want to squander this opportunity.

So what do you think, reader? Is it a good idea to lock in low rates today and plan to keep that debt for the next 15 years? Do you *actually* sleep better at night with no debt, or is that just something people say?


    1. That’s awesome, but don’t discount the flexibility that having a 30-year mortgage can give you too. It’s still possible to pay as though you are on a 15-year timeframe, while cutting back to standard 30-year minimum payments when money gets tight. I just went with 15 years because I was down to 16.75 years remaining on my existing loan

      1. We’ve thought about a 30. But taxes/mortgage/other random stuff built into that payment at a 15 where we’re looking to buy is currently less than rent. Although, I guess I could invest the difference in the market. I just hate the idea of owing anything, but I also hate renting. Haha. ALL THE CHOICES!

      2. I rented for less than a year right out of college and hated it, but 99% of that hatred was reserved for a jackass of a roommate (Hi Todd Funk, you lousy bastard of a roommate!)

      3. Bahahaha, my roommate is my husband, so I don’t think that’s the problem. 😉 I have had my fair share of crappy roommates, though.

    2. Sounds like you are doing a smart thing. 15 year fixed rate will definitely be a calmer situation than a ARM.
      I feel like I would sleep better without my mortgage, but only time will tell.
      Congrats on the refinance.

      1. Got my paperwork signed in record time this afternoon 😁 waiting on the checks to arrive in the mail over the next 2-6 weeks!

  1. Sounds like a great plan. We had a similar situation, where I spent a period of time plowing extra cash into principal payments, only to realize I could have been doing better things with the money. If rates keep trending down, we’ll look at doing a cash out refinance at a lower rate, and investing the difference.

    1. It’s maybe not the best idea for the average homeowner, but it’s a good move for those of us pursuing FIRE 😀 Thanks for the comment

  2. Hey there, Josh. I think the answer depends a bit on how far you are from early retirement (or if that’s even part of your particular FI plan). If you’re many years away, then arbitrage opportunities are your friend.

    But if you’re very close to stopping work, then sequence of return risk is your enemy: and as Big ERN shows, mortgages are bad for early retirees as the increase sequence of return risk.

    FWIW, we’ve paid off two mortgages and, yes, from a stress perspective it’s way better without the mortgage AND with fewer assets at risk when CAPE is as high as it is. We sleep better. But, as always, YMMV.

    1. I was counting on a reply like this from you! And yes, I can see the difference from your story where now you’re technically FI thanks to the reduced monthly expenses. I’m around 6 years from my FI date, but I feel more settled in my planning now that I know I won’t be paying a dime more towards principal. I can invest any extra cash that comes my way without any internal conflict on my part

  3. I think this is a smart move. It is a great use case that even if rates are good now, getting a variable mortgage is pretty risky. I would be nervous in your shoes too.

    I think we are close to a similar age (about to turn 36 myself), and my wife and I have decided we won’t make extra payments. We have a fixed rate mortgage at 3.625% (30-year mortgage), which is pretty solid compared to the past.

    My thought is that I am willing to take the extra risk to make as much money in the next 15ish years as possible to make up lost ground on our net-worth. As long as the yearly average of the stock market over the next 10-15 years doesn’t dip below 3.625%, this should be the best financial decision.

    Seeing how much your house devalued over that time is scary. “Hopefully” we won’t see a housing bubble like this anytime soon, but it is a good reminder that these things can happen. I’m glad you were able to lock in such a low rate! I bet it was a hard decision, but I don’t think you will regret making that move.

  4. I’m on a journey to pay off my house in about 6 years. It may not be the smartest move on papaer but competition in my industry is increasing and there’s always the chance that my company won’t last. Not a very good chance, but the anxious part of me wants my house paid off so that I could survive on less money. Because if I lose this job I’m not sure what job I *could* work (health problems) so yeah… I want my mortgage paid off. But I’m still focusing more on bulking up retirement so I’m at least doing that right.

    1. The smartest move is the one you stick with and makes the most sense for your situation. I think you’ve found the right one for you!

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