Is paying off your mortage a #1 personal finance priority?
"Paying off your house quickly should be a #2-level priority, behind making sure you have some basic savings but definitely ahead of any investing concerns, because your house is not an investment; it's your home.  (If you're brave/foolish enough to try buying houses-as-investments in the current climate, this obviously doesn't apply to you!) This isn't a financial matter so much as an issue of basic prudence.  If something disastrous happens, (you lose your job, get in a serious car accident, your kid comes down with cancer, etc,) it will put tremendous strain on your financial resources.  If you own your home outright when this happens, it means that no matter what else might go wrong, you can't get foreclosed on and end up out on the streets, and that's worth more than any rate of return you can reasonably expect to find even in the best of times. It's a well-known investing maxim to ""never bet anything that you can't afford to lose.""  In light of that, consider this: if you have a mortgage that is not paid off, that's exactly what you're doing.  You are placing a bet against a bank that you'll remain solvent long enough to pay off the mortgage, and your home is the wager.  Mortgages may be a necessary evil with housing prices being what they are, but make no mistake, they are evil.  Get rid of yours as quickly as you can." "For some people, it should be a top priority.  For others, there are higher priorities.  What it should be for you depends on a number of things, including your overall financial situation (both your current finances and how stable you expect them to be over time), your level of financial ""education"", the costs of your mortgage, the alternative investments available to you, your investing goals, and your tolerance for risk. Your #1 priority should be to ensure that your basic needs (including making the required monthly payment on your mortgage) are met, both now and in the near future, which includes paying off high-interest (i.e. credit card) debt and building up an emergency fund in a savings or money-market account or some other low-risk and liquid account.  If you haven't done those things, do not pass Go, do not collect $200, and do not consider making advance payments on your mortgage.  Mason Wheeler's statements that the bank can't take your house if you've paid it off are correct, but it's going to be a long time till you get there and they can take it if you're partway to paying it off early and then something bad happens to you and you start missing payments.  (If you're not underwater, you should be able to get some of your money back by selling - possibly at a loss - before it gets to the point of foreclosure, but you'll still have to move, which can be costly and unappealing.)  So make sure you've got what you need to handle your basic needs even if you hit a rough patch, and make sure you're not financing the paying off of your house by taking a loan from Visa at 27% annually. Once you've gotten through all of those more-important things, you finally get to decide what else to invest your extra money in.  Different investments will provide different rewards, both financial and emotional (and Mason Wheeler has clearly demonstrated that he gets a strong emotional payoff from not having a mortgage, which may or may not be how you feel about it).  On the financial side of any potential investment, you'll want to consider things like the expected rate of return, the risk it carries (both on its own and whether it balances out or unbalances the overall risk profile of all your investments in total), its expected costs (including its - and your - tax rate and any preferred tax treatment), and any other potential factors (such as an employer match on 401(k) contributions, which are basically free money to you).  Then you weigh the pros and cons (financial and emotional) of each option against your imperfect forecast of what the future holds, take your best guess, and then keep adjusting as you go through life and things change. But I want to come back to one of the factors I mentioned in the first paragraph.  Which options you should even be considering is in part influenced by the degree to which you understand your finances and the wide variety of options available to you as well as all the subtleties of how different things can make them more or less advantageous than one another.  The fact that you're posting this question here indicates that you're still early in the process of learning those things, and although it's great that you're educating yourself on them (and keep doing it!), it means that you're probably not ready to worry about some of the things other posters have talked about, such as Cost of Capital and ROI.  So keep reading blog posts and articles online (there's no shortage of them), and keep developing your understanding of the options available to you and their pros and cons, and wait to tackle the full suite of investment options till you fully understand them. However, there's still the question of what to do between now and then.  Paying the mortgage down isn't an unreasonable thing for you to do for now, since it's a guaranteed rate of return that also provides some degree of emotional payoff.  But I'd say the higher priority should be getting money into a tax-advantaged retirement account (a 401(k)/403(b)/IRA), because the tax-advantaged growth of those accounts makes their long-term return far greater than whatever you're paying on your mortgage, and they provide more benefit (tax-advantaged growth) the earlier you invest in them, so doing that now instead of paying off the house quicker is probably going to be better for you financially, even if it doesn't provide the emotional payoff.  If your employer will match your contributions into that account, then it's a no-brainer, but it's probably still a better idea than the mortgage unless the emotional payoff is very very important to you or unless you're nearing retirement age (so the tax-free growth period is small).  If you're not sure what to invest in, just choose something that's broad-market and low-cost (total-market index funds are a great choice), and you can diversify into other things as you gain more savvy as an investor; what matters more is that you start investing in something now, not exactly what it is. Disclaimer: I'm not a personal advisor, and this does not constitute investing advice.  Understand your choices and make your own decisions." You say A #1 priority, that implies multiple #1 priorities. Long term or medium term my goal is to pay off the mortgage. But short term paying off the mortgage isn't a concern. Some people are comfortable with a mortgage during retirement, others aren't. When I was younger the mortgage concern was not being overextended. I didn't want to be in a situation that dictated my financial decisions because I needed to make a big house payment. Being overextended is no longer a concern for me. Now I am looking in more detail about how my retirement will actually play out. How to handle my actual retirement income sources. For me, not having a mortgage simplifies my planning. Paying off your mortgage early being good is a myth.  It is great for the chronic overspenders to have their mortgage paid off so when they rack up credit card bills and get behind, well they still hae a place to stay. But for those who are more logical with their money paying off your mortgage early in current conditions makes no sense.  You can get a 30 year loan well below 4%.  Discounting taxes for your average family you would have a rate floating below 3%.   So reasons that paying off your mortgage should be almost LAST (given current low long-term interest rates): The first thing you should do is take care of any high interest debt.  I would say that anything more than 7-8%, including all credit card debt should be focus #1. putting money into your retirement savings is #1.  You will earn way more than 3% over the long-run.  you can earn a higher return in the market.  Even with a very conservative portfolio you can clear 5-6%, which will still clear more than 3% after taxes. for those who say you can't be sure about the market... well if the market did bad for 30 years in a row no one will have money and the house will also be worthless. if a disaster happens to your house and you own it, your money is gone.  In many cases you would be able to declare bankruptcy and let the bank take the property as is.   there are just too many examples but if you are paying off your house early, you lose the flexible/liquid money that you now have tied up in the house. Now the reasons for paying down your mortgage are really easy too: you don't trust your spending habits you want to move up in houses and you want to make sure that you have at least 20% down on future house to skip PMI. If you can make enough ROI from the capital you retain by not paying off your mortgage, then why not? I do, I could pay off a significant chunk of mortgage if I wanted but whilst interest rates are low there's little incentive. As for another crash... Well, there's no reason to expect a crash would result in high interest rates, more the opposite, but you should consider what you would or could do if interest rates did jump to 15% for whatever reason. As long as your investments aren't too risky or difficult to liquidate, etc, you could always consider paying off a big chunk then, when it makes sense. "Math says invest in the Market (But paying off your mortgage early is a valid option if you are very risk averse.) You are going to get a better return by investing in the stock market.  In the US in 2015/2016, mortgages are 3%-4%, and give you a tax break.  The rate of return on the stock market is ~10%, (closer to 6% after you subtract out inflation, taxes, fees, etc.) Since 10 > 3, (or 6% > 4%, to use the pessimistic numbers)  investing in the market is the better deal. But... The market has risk, and your mortgage does not.  If you are very risk averse paying off the mortgage may make sense. As an example:  Family A has a single ""breadwinner"", who works a low skilled job. Family B has 2 working spouses, both in high skill white collar positions.   These two families are going to have wildly different risk tolerances.  It may make sense for family A to ""invest"" its extra money in paying off the mortgage, after they have tackled high interest debt, built an emergency fund, maxed the 401k, etc. Personally I would not: in the US you cannot recoup pre-payments if you lose your job.  If I was very risk averse, I would keep my extra money as cash, so I could pay my mortgage after I lost my job.  It is never going to make sense for family B to pay the mortgage early.  At that point, any decision to pre-pay is going to be based on emotion and not logic." Generally, paying down your mortgage is a bad idea. Mortgages have very low interest rates and the interest is tax deductable. If you have a high interest mortgage, or PMI, you might consider it, but otherwise, your money is better off in some sort of index fund. On the other hand, if your choices are paying down a mortgage or blowing your money on hookers and booze, by all means do the mortgage. Typical priorities are: Dave Ramsey has a more detailed plan. The answer depends entirely on your mortgage terms - is the interest rate low, how many years left? Questions like this are about Cost of Capital. If your mortgage has a low interest for a lot of years, you have a low cost of capital.  By paying it off early, you are dumping that low cost of capital. Use the extra money to start a business, invest in something or even buy another property (rental).  Whenever you have a low cost of capital, don't rush to get rid of it. Of course, if there are no other investment/business opportunities available and the extra money is going into a low return savings account, you might as well pay down your debt.  Or if you lack the self discipline to use the extra money properly - buying flat screens and meals out - then yeah just pay down your debt. But if you're disciplined with the extra money, use it to get access to more capital and make that new capital work for you. Highest priority compared to what?  Obviously priorities should be repaying debt in the order of interest percentage. Which means among your debts, the mortgage likely comes last. Trying to get a better mortgage deal however has a huge priority.  And if you have a choice between wasting money and paying off the mortgage, the mortgage should have higher priority. It is one thing to take the advice of some numb-skulls on a web site, it is another thing to take the advice of someone who is really wealthy. For myself, I enjoy a very low interest rate (less than 3%) and am aggressively paying down my mortgage.  One night I was contemplating slowing that down, and even the possibility of borrowing more to purchase another rental property. I went to bed and picked up Kevin O'Leary's book(Cold Hard Truth On Men, Women, and Money: 50 Common Money Mistakes and How to Fix Them), which I happened to be reading at the time.   The first line I read, went something like:  The best investment anyone can make is to pay off their mortgage early.  He then did some math with the assumption that the person was making a 3% mortgage payment.   Any conflicting advice has to be weighted against what Mr. O'Leary has accomplished in his life.  Mark Cuban also has a similar view on debt.  From what I heard, 70% of the Forbes richest list would claim that getting out of debt is a critical step to wealth building. My plan is to do that, pay off my home in about 33 (September '16) more weeks and see where I can go from there.
You should check out Dave Ramsey's Baby Steps.  He has an great and well organized plan for getting out of debt and building wealth.  My wife and I have followed the plan and will be paying off our home this year :)  His advice on debt payments is to pay off the smallest balance first.  This helps motivate you and your husband to push harder on your debts.   Once the first pay is paid the money that would have gone to that debt is applied to the next smallest debt and so on.  This is called a 'debt snowball' since by the end you will have plenty of money to pay that last few debts.  While working on the smallest debt, making minimum payments on the others. Stop using the credit cards entirely! Don't use gimmicks to avoid facing the reality of the debt.  Close your accounts and commit to never borrowing money again. This is a huge physiological shift.  I used credit cards all the time for decades, that is a thing of the past for us, we pay cash or don't buy it.  In your case, paying the 80% interest loan off is likely to be priority.  I didn't even realize that was legal.  Hopefully that is also the smallest balance.   Start making a monthly budget and sticking to it.  Check out Dave's 'irregular income' budget form, it is meant for couples in your situation.  The first steps will be to pay food, rent, utilities and transportation.  After that, list your debts in priority order and pay them as your husbands income comes in during the month.  Don't despair, you two can get your financial life cleaned up! You just need a good plan and a lot of focus. "Before filing your first business tax return, you will need to choose a taxation method, either corporation or partnership. If you choose a partnership, then it's moot - your business income flows through to your personal taxes via form K-1. Also, regardless of your taxation method, you should consult a legal expert, since having your business pay off your personal debt would almost always be counted as income to you, and may cause you to lose the personal liability protections provided by the LLC (aka ""piercing the corporate veil""). Having a single-member LLC with no employees, you have to be very careful how you manage the finances of the business. Any commingling of personal and business could jeopardize your protections." Private Mortgage Insurance. It's money that you pay to an insurance company to make the lender whole in the event that you go into default. It's a real waste of money for you. If you are trying to finance more than 80% of the value of a home, a standard mortage is likely to require that you get PMI. Nowadays there are other options which involve paying substantially more interest. Gaining traction is your first priority. WARNING: as @JosephZambrano explains in his answer the tax penalty for withdrawing from a 401(k) can easily exceed the APR of the credit card making it a very bad strategy. Consult in-depth with a financial advisor to see before taking that path.  As @JoeTaxpayer has noted a loan is another alternative. The 401k is no good to you if you can't have shelter or comfort in the mean time.  The idea is to look at all the money as a single thing and balance it together.  There is no credit and retirement, just a single target that you can hit by moving the good money to clear the bad. Consolidating the credit card debt somehow would be very wise if you can.  Assuming it is 30% APR shrinking that quickly is the first priority. You may be able to justify a hardship withdrawal to finance the reduction/consolidation of the credit card.  It may be worth considering negotiating a closure arrangement with a reduced principal.  Credit card companies can be quite open to this as it gets their money back. You may also be able to negotiate a lower interest rate. You may be able to negotiate a non-credit-affecting debt consolidation with a debt consolidator.  They want to make money and a 25K loan to a person with sound credit is a pretty good bet. Moving, buying a house, or any of that may just relocate the problem.   You may be able to withdraw $25K from your 401k under hardship, pay the credit card, and come up with a payment plan for the medical debt. It's a retirement setback for sure, but retirement is an illusion with that credit card shark eating all of your hard-earned money.  You gotta slay that beast quick. Again, be sure to fully analyze whether the penalty on the 401(k) withdrawal exceeds the APR of the credit card. "Getting a mortgage for the interest write-off is like buying packs of baseball cards for the gum. That said, I'd refer you to The correct order of investing as much of that question really overlaps with this. This question boils down to priorities, the best use of the funds. There are those who suggest that a mortgage brings risk. Of course it does, just not for the borrower, the risk is borne by the lender. Risk comes from lack of liquidity. Say your girlfriend buys the house with cash, and leaves little reserve. She loses her job, and it's great that she has no mortgage. But she does have every other cost life brings, including a tax bill that can turn into a house getting foreclosed on. The details that you didn't disclose are those needed to look at the rest of the ""priorities"" list. A fully funded 401(k) with appropriate balance, and no other debt? And a 1 year emergency fund? I wouldn't argue against buying the house with cash. No real savings and passing on the 401(k) matched deposit? I'd think carefully about the longterm impact of the cash purchase." "Concise answers to your questions: Depends on the loan and the bank; when you ""accelerate"" repayment of a loan by applying a pre-payment balance to the principal, your monthly payment may be reduced. However, standard practice for most loan types is that the repayment schedule will be accelerated; you'll pay no less each month, but you'll pay it off sooner. I can neither confirm nor deny that an internship counts as job experience in the field for the purpose of mortgage lending. It sounds logical, especially if it were a paid internship (in which case you'd just call it a ""job""), but I can't be sure as I don't know of anyone who got a mortgage without accruing the necessary job experience post-graduation. A loan officer will be happy to talk to you and answer specific questions, but if you go in today, with no credit history (the student loan probably hasn't even entered repayment) and a lot of unknowns (an offer can be rescinded, for instance), you are virtually certain to be denied a mortgage. The bank is going to want evidence that you will make good on the debt you have over time. One $10,000 payment on the loan, though significant, is just one payment as far as your credit history (and credit score) is concerned. Now, a few more reality checks: $70k/yr is not what you'll be bringing home. As a single person without dependents, you'll be taxed at the highest possible withholdings rate. Your effective tax rate on $70k, depending on the state in which you live, can be as high as 30% (including all payroll/SS taxes, for a 1099 earner and/or an employee in a state with an income tax), so you're actually only bringing home 42k/yr, or about $1,600/paycheck if you're paid biweekly. To that, add a decent chunk for your group healthcare plan (which, as of 2014, you will be required to buy, or else pay another $2500 - effectively another 3% of gross earnings - in taxes). And even now with your first job, you should be at least trying to save up a decent chunk o' change in a 401k or IRA as a retirement nest egg. That student loan, beginning about 6 months after you leave school, will cost you about $555/mo in monthly payments for the next 10 years (if it's all Stafford loans with a 50/50 split between sub/unsub; that could be as much as $600/mo for all-unsub Stafford, or $700 or more for private loans). If you were going to pay all that back in two years, you're looking at paying a ballpark of $2500/mo leaving just $700 to pay all your bills and expenses each month. With a 3-year payoff plan, you're turning around one of your two paychecks every month to the student loan servicer, which for a bachelor is doable but still rather tight. Your mortgage payment isn't the only payment you will make on your house. If you get an FHA loan with 3.5% down, the lender will demand PMI. The city/county will likely levy a property tax on the assessed value of land and building. The lender may require that you purchase home insurance with minimum acceptable coverage limits and deductibles. All of these will be paid into escrow accounts, managed by your lending bank, from a single check you send them monthly. I pay all of these, in a state (Texas) that gets its primary income from sales and property tax instead of income, and my monthly payment isn't quite double the simple P&I. Once you have the house, you'll want to fill the house. Nice bed: probably $1500 between mattress and frame for a nice big queen you can stretch out on (and have lady friends over). Nice couch: $1000. TV: call it $500. That's probably the bare minimum you'll want to buy to replace what you lived through college with (you'll have somewhere to eat and sleep other than the floor of your new home), and we're already talking almost a month's salary, or payments of up to 10% of your monthly take-home pay over a year on a couple of store credit cards. Plates, cookware, etc just keeps bumping this up. Yes, they're (theoretically) all one-time costs, but they're things you need, and things you may not have if you've been living in dorms and eating in dining halls all through college. The house you buy now is likely to be a ""starter"", maybe 3bed/2bath and 1600 sqft at the upper end (they sell em as small as 2bd/1bt 1100sqft). It will support a spouse and 2 kids, but by that point you'll be bursting at the seams. What happens if your future spouse had the same idea of buying a house early while rates were low? The cost of buying a house may be as little as 3.5% down and a few hundred more in advance escrow and a couple other fees the seller can't pay for you. The cost of selling the same house is likely to include all the costs you made the seller pay when you bought it, because you'll be selling to someone in the same position you're in now. I didn't know it at the time I bought my house, but I paid about $5,000 to get into it (3.5% down and 6 months' escrow up front), while the sellers paid over $10,000 to get out (the owner got married to another homeowner, and they ended up selling both houses to move out of town; I don't even know what kind of bath they took on the house we weren't involved with). I graduated in 2005. I didn't buy my first house until I was married and pretty much well-settled, in 2011 (and yes, we were looking because mortgage rates were at rock bottom). We really lucked out in terms of a home that, if we want to or have to, we can live in for the rest of our lives (only 1700sqft, but it's officially a 4/2 with a spare room, and a downstairs master suite and nursery/office, so when we're old and decrepit we can pretty much live downstairs). I would seriously recommend that you do the same, even if by doing so you miss out on the absolute best interest rates. Last example: let's say, hypothetically, that you bite at current interest rates, and lock in a rate just above prime at 4%, 3.5% down, seller pays closing, but then in two years you get married, change jobs and have to move. Let's further suppose an alternate reality in which, after two years of living in an apartment, all the same life changes happen and you are now shopping for your first house having been pre-approved at 5%. That one percentage point savings by buying now, on a house in the $200k range, is worth about $120/mo or about $1440/yr off of your P&I payment ($921.42 on a $200,000 home with a 30-year term). Not chump change (over 30 years if you had been that lucky, it's $43000), but it's less than 5% of your take-home pay (month-to-month or annually). However, when you move in two years, the buyer's probably going to want the same deal you got - seller pays closing - because that's the market level you bought in to (low-priced starters for first-time homebuyers). That's a 3% commission for both agents, 1% origination, 0.5%-1% guarantor, and various fixed fees (title etc). Assuming the value of the house hasn't changed, let's call total selling costs 8% of the house value of $200k (which is probably low); that's $16,000 in seller's costs. Again, assuming home value didn't change and that you got an FHA loan requiring only 3.5% down, your down payment ($7k) plus principal paid (about another $7k; 6936.27 to be exact) only covers $14k of those costs. You're now in the hole $2,000, and you still have to come up with your next home's down payment.  With all other things being equal, in order to get back to where you were in net worth terms before you bought the house (meaning $7,000 cash in the bank after selling it), you would need to stay in the house for 4 and a half years to accumulate the $16,000 in equity through principal payments. That leaves you with your original $7,000 down payment returned to you in cash, and you're even in accounting terms (which means in finance terms you're behind; that $7,000 invested at 3% historical average rate of inflation would have earned you about $800 in those four years, meaning you need to stick around about 5.5 years before you ""break even"" in TVM terms). For this reason, I would say that you should be very cautious when buying your first home; it may very well be the last one you'll ever buy. Whether that's because you made good choices or bad is up to you." Another unmentioned reason: flexibility and liquidity.  There is a fundamental difference between installment and revolving debt, such that it could be rational to pay revolving debt before an amortizing loan.   Lets say you have 100K in cash, a 100K mortgage at 4% and 4 25K credit cards at maximum balance and a 0% promotional rate (at least for now).   If you pay off the mortgage, you may not get liquidity if you need it.  This path is not necessarily reversible.   If you pay off the credit cards, you have 100K of credit available to you.  You can reverse to the case of having 100K in cash, and 200K in debt. Pay the the smallest balance first. The sooner you pay that off, the sooner you can pay more on the mortgage.