Should I pay off my mortgage early if this isn’t my forever home?

Even if you’ve got a mortgage on a starter home (rather than your dream home that you’ll be staying in), it still makes sense to chip bigger chunks of your mortgage, especially if you’ve got the extra cash that doesn’t have a job to do. Sure, you could do a whole lot better by investing the proceeds rather than paying off loans.

But in today’s environment, where stocks have recently corrected, with tariffs, inflation, and recession fears that could upend the economy, I’d argue it could prove a lot harder to score a double-digit percentage return. And for those who already have more than their fair share of stock exposure (or more than they’d be comfortable taking in today’s wobbly market), paying off a mortgage sooner than expected can be a very wise financial move.

Of course, a financial advisor should be consulted before one makes such a major decision. Paying off a mortgage early has its fair share of pros. However, if you’re set on another home, saving and investing for your next home could make a lot of sense, especially since interest rates aren’t obscenely high. In any case, it’s a tough call and one that should be thought through carefully before signing any dotted line. On the surface, paying off outstanding mortgage debts is a responsible thing to do. But if it comes at the cost of one’s liquidity, it can be a less-than-optimal move.

This Reddit user has the means to pay off their current mortgage. But they’re not planning on sticking around.

Indeed, with an interest rate in the 5% range (it’s not too high, not too low, at least in my opinion), I’d say there’s a degree of flexibility for the Reddit user. Indeed, there’s no shame in having more liquidity to invest in opportunities within the stock market, especially if the S&P 500 correction has further room to the downside. Personally, I’d put off the decision until one has more clarity on their longer-term options.

Additionally, with a potential recession in the cards, a “dream” home may move further out of reach, especially if the Reddit user is hit with layoffs. Perhaps such a grim scenario would make someone content with staying put, rather than “upgrading” to their dream home.

Though it’s nice to be ambitious, it is possible to have too much house. A six-bed, seven-bath house doesn’t make a whole lot of sense, especially if you’re living alone. Either way, I’d argue that the Reddit user should contact a wealth planner and take their time before making a move, especially if Trump tariffs set the stage for a year or two of high inflation and weaker employment.

In such an unfortunate scenario, staying put and maintaining liquidity could be the best course of action as interest rates continue to fall. Perhaps putting the cash in dividend-paying securities could make a lot of sense, as one looks to use passive income as a way to dampen any future spike in inflation.

Remember, just because one has options doesn’t mean they should exercise them if they’re anything less than 100% certain the move they’re making will lead to no regrets.

The bottom line

There’s ample peace of mind to be had by paying off the mortgage early. However, paying it down as soon as possible isn’t always the best move, especially if one hopes to “upgrade” soon, or if there’s a recession on the horizon. Combined with modest interest rates and I think there’s no need to rush into making a decision.

In this environment, liquidity and a modest home could be the best way to navigate an economic hailstorm, at least in my humble opinion. As always, ask a financial-planning pro for their thoughts. They can help you weigh the financial (and psychological) ups and downs of paying off a mortgage early.

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