In 2009, after paying off roughly $52,000 in debt, Jackie Beck and her husband decided to tackle their mortgage and pay it off early. “If you’d graphed our progress [on the mortgage] it would have looked like a hockey stick, starting out slowly and then shooting up toward the end,” Beck says.
Some financial experts might argue that in the current climate of relatively low mortgage rates, it’s more efficient to take the mortgage interest tax deduction and invest extra money instead of putting it in mortgage principal. But Beck doesn’t buy that argument. “That assumes you can only do one thing, and that’s definitely not the case. We did both,” she says.
The couple didn’t cut out all discretionary spending, though. “We built in some fun and some breaks so we could keep focus,” Beck says. With the money they had saved, her husband bought the stereo system he wanted and she got to travel to Paris.
In August 2012, they made the final payment on their home in Arizona. Beck also created the Pay Off Debt app (compatible with iOS and Android) to share the strategies she used to organize their debts and track their progress.
Financial planners say choosing when to pay off your mortgage is rarely a clear-cut mathematical decision. For one thing, many people cite the mortgage interest tax deduction as an argument against early payoff. But as Cary Cates, certified financial planner at Cates Tax Advisory and an enrolled agent in Denton, Texas, points out, some people opt for the standard deduction rather than itemizing, so “the mortgage interest deduction may not be as valuable as many people think,” he says. Also remember that while a tax credit reduces your tax liability dollar for dollar, a deduction simply reduces the amount of money you’re taxed on.