Two and a half years ago, I shared with you our plan for paying off our mortgage early. In that post, I walked you through our journey up until that point, from simply making extra payments each month to investing the extra payment in a brokerage account. Over the last year there’s been a new plot twist (as I alluded to in this post!), and I’m happy to pull back the curtain today! Let’s look at a timeline, shall we? Spring 2013: We buy our house! We pull together a 13% down payment. Fall 2014: After paying off our car loans, we use about half of what we had been paying to make an extra mortgage payment each month (directly to the bank), and the other half to build up a fund for our next car purchase. Fall 2015: Car fund complete, we shift the amount we’d been paying toward our mortgage, too. Instead of paying down our mortgage directly, though, we begin transferring the extra monthly amount into a brokerage account and invest it in a mutual fund.* The main critique of paying off a mortgage early is that it doesn’t make sense to pay off a low interest rate mortgage when you could be earning higher rates of return by investing. We still planned to pay ours off early, but ALSO wanted to take advantage of compounding interest by investing the extra payment instead of applying it directly to the mortgage. We were comfortable with the extra risk that exposed us to (and the extra willpower it required of us!). When we saved enough to pay off our mortgage, we would pay it in one lump sum. Hooray, right!? My husband, though. He’s always thinking. And last year, he came to me with a suggestion: what if, instead

In my last Marvelous Money post, I shared our current Big Goal: paying off our mortgage early, in the next five years. I’ve had some questions about how and why we are doing that, so I thought we could chat about it today! Why we are paying off our mortgage early: Though paying off our mortgage early seems like a slam-dunk choice to us, there are pros and cons. Here are a few: To expand a bit on these reasons: — Save (probably many) thousands of dollars in interest payments: By paying off our mortgage more than 20 years early, John and I will save roughly $120,000 (!!!!!) That is a LOT of vacations and dance lessons and flights to see loved ones and delicious dinners out over a lifetime. That excites us! — Reduce your nut: Megan McArdle describes your financial “nut” as “the amount of money that you absolutely have to pay every month if you don’t want scary-looking men to start repossessing your possessions.” Think: fixed expenses like car loans, student loans, mortgages, and the electric bill. — Increase your freedom: The smaller your nut – the fewer obligations you have per month – the more freedom you have. If your nut is tiny, you can quit your job for one you love with a lower salary, or start your own business, or stay home with your kids. You can travel, or support charities that matter to you, or buy the most delicious-looking food at Whole Foods every week. — Increase your share of ownership in an asset: As you pay off your mortgage, you’re buying more and more of your house from the bank and building equity (money in your pocket if you choose to sell one day!). — Earn a guaranteed rate of return: You