Dave Ramsey: Why You Should Pay Off Your Mortgage Early
Written by
Katie Wudel
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Dave Ramsey has long advocated for the benefits of being debt-free. Among various types of debts, a mortgage is often the largest and most burdensome for many households. Ramsey argues that paying off your mortgage early can lead to significant financial freedom and stability.
Understanding the Mortgage Burden
A mortgage, for most people, represents a long-term financial commitment, often spanning 15 to 30 years. This debt not only includes the principal amount borrowed to purchase the home but also a substantial amount of interest over the life of the loan. The longer the mortgage term, the more interest you will pay.
The Psychological Benefits
Paying off your mortgage early can provide immense psychological relief. Owning your home outright gives a sense of security and accomplishment. It eliminates one of the largest monthly expenses, reducing stress and anxiety related to financial obligations, says Ramsey during an episode of The Ramsey Show. This peace of mind is invaluable and often motivates individuals to pursue other financial goals with greater confidence.
Financial Advantages
One of the most compelling reasons to pay off your mortgage early is the potential savings on interest payments. Ramsey points out that even reducing the mortgage term by a few years can save tens of thousands of dollars in interest.
Increased Cash Flow
Once your mortgage is paid off, the money that was going toward your monthly payment is freed up. This increased cash flow can be redirected toward savings, investments, or other financial goals, accelerating your journey toward financial independence.
Boost in Net Worth
Paying off your mortgage early increases your net worth. A fully owned property is a valuable asset that adds to your financial strength. It can serve as a foundation for wealth building, allowing you to invest in other properties, stocks, or retirement funds.
Strategies for Early Payoff
Make extra payments. One simple strategy is to make extra payments toward the principal. This can be done by paying a little extra each month, making bi-weekly payments, or paying an additional lump sum when possible.
Refinance to a shorter term. Refinancing to a shorter-term loan, such as from a 30-year to a 15-year mortgage, can also accelerate your payoff. This often comes with a lower interest rate, further enhancing savings.
Make budget adjustments. Adjusting your budget to allocate more funds toward your mortgage can make a significant difference. It may require cutting back on discretionary spending, but the long-term benefits are worth the sacrifice.
The Takeaway
Paying off your mortgage early aligns with Ramsey’s principles of financial peace and independence. It’s a significant step toward a debt-free life, offering both psychological and financial benefits. While it requires discipline and strategic planning, the payoff is a more secure and prosperous financial future. Ramsey’s advice is clear: if you have the means to do so, paying off your mortgage early is a wise financial decision.
Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.
More From GOBankingRates
