Paying off a home is a huge accomplishment. And it affects your life a lot more than you’d think.
From lower expenses to new life opportunities, paying off your home might feel like a different world. While the task is daunting, you can definitely pay off your home early with some hard work and time.
The benefits of a paid-off house are many, and I couldn’t possibly list them all here. But I’m going to try! These benefits will help you see why paying off your home is important and why it should be one of your biggest money goals.
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1. Your Expenses are Now Significantly Lower
Paying off your house is going to lower your expenses, big time. For most people, a house payment is one of the most significant expenses they have.
Think of that number in your mind: can you imagine not having to pay that each month? How much more freedom comes with that?
Picture what you might be able to do with expenses that are maybe thousands lower per month. There are a million ways to save or use the extra cash.
You might be able to start taking more vacations to luxurious places. Maybe you’ll invest more money. There’s a lot to think about and tons of possibilities.
Lower expenses are one way to feel like you’re richer, too. You don’t have to make any more money than you did before, but suddenly, it feels like you have a lot more income. And you do – you aren’t spending a large portion of it on your home anymore.
In this way, not having a mortgage is sort of like getting a promotion or an inheritance.
2. Easier to Meet Your Financial Goals
Maybe you’ve been working towards a savings goal, like a larger emergency fund. Or perhaps you want to save up some money for an investment or business venture.
Either way, you should be able to add a lot more cash to these financial goals when you pay off your home. It’s a chance to pursue new things and not need to worry about a hefty bill every month.
Whenever there’s something that you want to save for, you’re likely to get there a lot faster, too. Your resources are less limited, and more money can accomplish things more quickly.
For example, if you want to save up $6000 to invest, and you have a house payment of $1000, and only $1000 in discretionary income each month, it will take a while to save.
In about six months, you’ll be able to afford to invest. But without a house payment, you could complete this goal in three months instead.
See how much faster everything is without having to pay for a house? And anything extra beyond your regular income doesn’t have to cover house costs, so you might even reach that $6000 in two months with some dedication.
But the great thing is you are no longer slowed down by a mortgage.
3. Increases Your Net Worth
When you own your home outright, the amount your home could sell for becomes part of your net worth. This means it is a bit dependent on the current housing market and what people are willing to pay at the time, but this typically works in your favor.
House value tends to increase over time rather than decrease, so owning your home entirely means that you wouldn’t just keep a small portion of the home if you sold. You’d keep all of it, minus fees for the realtor and things like closing costs, etc.
When people speak about net worth, typically, the cost of your home is included in that amount. You just became richer!
And not only that but the longer you hold onto your house for, the more it is potentially going to be worth. So your net worth will likely increase over time.
You can add your home value to your other investments and the amount in your retirement account. These are all part of your net worth.
It’s exciting to see how much value a home has beyond just providing a place to live. Net worth is one of the benefits of a paid-off house.
4. You May Be Able to Retire Early
Check whether you can retire early by using this free retirement planner.
The idea of retiring early appeals to many, and you can absolutely do this if your home is paid for! Some people choose to retire when they’re in their 30’s or 40’s; others prefer a semi-early retirement in their 50’s.
Depending on when you pay off your home, you can start adding more to savings and possibly retire shortly after. Your house payment is out of the way, so you can save a lot more.
The F.I.R.E. movement (Financially Independent Retire Early) is definitely something to look into if you’re relatively young and considering paying off your home soon. It’s a great thing to think about if you feel tired of working or would like to travel more.
Some who follow this pattern may decide to pay for their homes outright or not own homes because of the high cost. The F.I.R.E movement promotes a type of life that is much easier to accomplish when your home is paid for.
If you’re nearing retirement age, paying off your home is still a great idea. It will lessen your payments each month, leaving you with more money on which to live.
You Can Apply Your Interest Savings to Retirement Savings
The sooner you pay off your house, the more you save in interest. Another one of the benefits of a paid-off house is you can put what you would have paid in interest to work for you in retirement savings.
If you pay off your home relatively quickly, you could save hundreds of thousands in interest. Not to mention what you’d collect in interest from investing this amount!
You could consider pretending that you still have a house payment once your mortgage is paid off. I know that sounds like the opposite of what you’re working towards, but stick with me.
Say your mortgage costs $1500 per month, but you just made your last payment. Congratulations! Now, instead of simply stopping payments, pretend you still have one.
Continue to pay the $1500, but place it into retirement savings instead. Nothing really changes for you, but you’re saving a ton more for your financial goals without it even making a big difference. You’re already used to the payment; it just goes somewhere else now.
You Won’t Need as Much Money to Live On
This is an exciting benefit of a paid-off house – it suddenly costs you a lot less money to live your day-to-day life. Without a mortgage, your life is much easier, and your payments are lower.
In fact, in some cases, you may have just cut your costs in half! That’s great news for your wallet.
Not needing as much cash to live on means you’ll potentially need less to retire on, as well. If you were planning to retire while still having a house payment, your expenses would cost more every month, and that would mean you’d need more money each year to live.
When you pay off your home, you no longer need to include home costs, and you may find that the amount you have saved is a lot closer to what you need than you thought.
Lower expenses also mean that you don’t have to be concerned if you make a little bit less money one month than the previous. As long as your income doesn’t vary wildly, you should be able to still make it without adding any stress to your life.
5. Peace of Mind
Peace of mind isn’t something that has a price…or does it? Not having a house payment is going to bring a lot of relief to your finances.
The added stress of high fees can affect you more than you’d think, and not having to think about a mortgage can help you be more relaxed. There are other benefits, too.
Things like security and saving also contribute to peace of mind, and you feeling better about money.
Losing Your Home is No Longer a Worry
Sometimes finances can be tight, and many people fall behind on mortgage payments. This can lead to severe stress and, in some extreme cases, to losing your home because you can no longer afford it.
Foreclosure is a genuine concern for many people, but it doesn’t have to be one for you.
When your home is paid for, you don’t have to be concerned about this. You can rest assured that your home can never be taken from you by the loan lender.
It also helps you to not worry about some concerns like making enough money to keep making mortgage payments. Some people must go to work day after day in order to pay their mortgage, and some don’t even enjoy their jobs.
One of the benefits of a paid-off house is there is no threat of foreclosure, and you can live without payments in your home for as long as you like.
Even if you choose to sell, you’ll make money from that, and you never have to have a house payment again if you don’t want to. You’ll live the rest of your life without any housing debt, which is usually one of the most expensive payments people have.
There’s also the comfort that no matter what happens with your finances, you’ll always have a place to live that is mortgage-free.
Yes, utilities and such will still need to be paid regularly. Still, it’s a much smaller payment compared to a mortgage, and it’s easy to use less water or electricity if you need to save.
The most important thing is you can’t be asked to leave a home that you own entirely, which is awesome.
You Can Save More Money
This is one of the obvious things that can bring greater peace of mind: you’ll have a lot more cash at your disposal. You no longer have a reason to pay a mortgage, so all that cash is available for you to do anything you’d like, as one of the benefits of a paid-off house.
A typical mortgage payment for the current year of 2021 is over $1200 for a 30-year mortgage in the U.S. That’s over $14,000 a year!
With that kind of extra money, what could you do? You might choose to start a business, buy real estate, or spend the money doing something else equally great. You have complete freedom when you have no debt.
Your finances will also be a lot freer without the necessity of paying for a place to live. Most people can’t even imagine living in this way.
It’s challenging to get to this point, but your life can become much more manageable once you do. You’ll have more cash and more room in your budget for healthcare, investing, or fun.
Keep track of all of your savings easily with Personal Capital’s free Savings Planner.
6. More Opportunity
“What can you do with a paid-for house?” isn’t the question. Rather, it’s “what can’t you do?”
There are a million opportunities when you no longer need to make this massive payment each month. The first thing you’ll probably do is take a deep breath of relief.
Your largest cost – gone forever! Now that you’ve accomplished that, you can think about what to do with your time, energy, and resources, now that none of them will be devoted to home payoff.
There are many examples of great opportunities, but what paying off your home really does is gives you freedom. Freedom to say yes to retirement, savings, travel, family, and career changes.
And the chance to say no to things that you maybe thought you wanted but actually don’t, like a promotion that will require a lot more hours at the office. You can choose what is best for you and your family, over what makes more money.
You’ll be able to use your time on projects that matter to you. Money no longer has to be such a significant factor in your plans, and other things can finally take center stage.
It can also help if you choose to buy another home in the future. You’ll receive a large portion (minus fees) of the price of your house if you decide to sell.
You can then purchase another home if you want, hopefully also without a mortgage. This is a great chance to buy a larger home or a house in a location you love, which is another of the great benefits of a paid-off house.
More Money to Travel
This is a fun one! Think about how much debt-free travel you can buy with the money you would have paid for your home.
Suddenly, that extra thousand or two a month becomes a trip to Europe or a chance to go skiing in the mountains. You’ll be able to have a ton of new experiences now without relying on credit cards or having to save for a very long time.
Some ideas for places to go: take a weekend trip to start out. See if you like traveling for as little money as possible, or if you want to be more extravagant with your spending. Either way, you can probably afford to do what you want now.
After you take a shorter trip and get an idea of how you like to spend on travel, you can start planning out some more extended vacations. And since you’re no longer paying for that house, you could also be working fewer hours, freeing up more of your time to see the world!
A longer trip might take several months to save for, and you could go somewhere nearby for a few weeks, or you might choose to go out of the country for months.
Another idea is to travel permanently and rent out your home. Without a house payment, you might be able to cover your other bills and travel expenses with rental costs, or at least a large portion of them.
You’re even free to make a career change and try working online if you like. Without a house payment, your risk level goes down, so you can afford to take chances.
More Money to Give
This is another fun thing to do with extra money. You can now afford to give away a lot more of it. What would have paid off your home can now go to charities, churches, or a non-profit organization of your choice.
There are many ways to give to others, and it’s a great thing to do with your extra funds. Check out these ideas for what you could do to help others now that you have the benefits of a paid-off house:
- You could pay a bill for someone in need. There are people everywhere who need help. Maybe one of your friends or an acquaintance needs some financial help; now is an excellent time to help out by paying for groceries or a utility bill.
- You could find a favorite charity to volunteer at. Try researching charities and finding something local that you can help out with. You might have more money now, but you also probably have more time. Give the gift of time by volunteering.
- Find an organization you believe in and send a check. It can be fun to find a charity that’s making a difference and simply write a check to help out with whatever they need. Look for something you genuinely believe in and feel good about helping with.
- Save up money in an account that is specifically to help others. Sometimes it isn’t clear who or what to give money to. But if you start saving, you’re sure to find something, and when you do, you’ll have some cash.
It’s an accomplishment that some people are never able to do. It’s definitely not the standard for most to live in a paid-for home, at least not until they’re retired.
If you can pay off your home at any time, especially early, you should be very proud of this.
The benefits of a paid-off house include increased financial confidence and may even lead to a happier life.
Your financial confidence grows because your payments are lower. You have more money to save and give, and you’ve accomplished something huge. This helps you know what you’re capable of financially.
A paid-off house may also lead to a happier life. Money may not give happiness directly, but not having a house payment could help you feel less stressed.
It may also help you be more financially secure and help you make decisions based on what you want and not money. All of these things make you a lot happier than you would be with a house payment.
Home payoff directly affects our lives in several ways, most of them positive. There are very few negatives to not having a house payment, and your satisfaction with life may increase.
The Benefits of a Paid Mortgage are Amazing
There are so many upsides to ditching your house payment for good. From more money to give to charity and travel with, to greater life satisfaction, there are plenty of things that make paying off your house a good choice.
The benefits of a paid-off house include financial, mental, and emotional well-being. You’ll likely feel better and make decisions in a different way when your expenses are so much lower.
Many mortgages last for 30 years; paying yours off sooner is a great idea. You can ease into this, starting with paying a bit of extra that will allow you to pay off your house a few years early.
Once that’s going well, try adding even more. Pay for your home as quickly as possible, trying for as fast as half the time, ten years, or even five.
Remember that any amount of extra money towards your home will be helpful, even if it seems like a small amount at first. It all adds up!
You might be thinking this sounds challenging, and it is, but you can absolutely pay off your mortgage for good. Yes, it may take some sacrifice, hard work, and long hours, but think of the benefits of a paid-off house.
I definitely encourage you to go for this goal. In the future, you’ll look back and be glad that you paid off your home.
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