4 Reasons We’re Paying Off Our Mortgage Early, Even at 2%

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• We refinanced our mortgage to a 1.99% interest rate in 2020.
• Even though it’s low, we plan to pay it off early so we can retire at 50.
• We want to be free of debt, lower our monthly expenses, and have peace of mind.

When my husband and I decided to trade up to a larger home in August 2020, we owned our current home free and clear. We opted to put down 20% of the purchase price on the new home and take out a mortgage for the remaining loan balance of around $300,000. From there, we planned to use the proceeds from the sale of our existing home, also around $300,000, to pay it off.

But since interest rates were so low in 2020, we were able to lock in a 15-year, fixed-rate mortgage at 2.75%. A few months after that, we refinanced that loan into another 15-year, fixed-rate mortgage at an even lower rate: 1.99%. Since I wasn’t willing to pay off a mortgage with a rate that low in one fell swoop, I invested the home sale money into index funds with the rest of our retirement savings.

We were left with a monthly mortgage payment of $1,749, excluding taxes and insurance, which is incredibly low for a 15-year loan on a house that’s now worth around $550,000 according to Zillow. Still, we’re on our way to paying off the home early and being mortgage-free (again) in the next few years.

Yes, we know that most people would love to have a mortgage rate anywhere close to 1.99%. We also know most savvy investors would pay the bare minimum on their mortgage for as long as they possibly could. But there are several important reasons we are paying off our mortgage by 2030.

1. Debt freedom makes early retirement easier

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First off, my husband and I have been planning to retire at the age of 50 for more than a decade. That puts our retirement date around five years from now. Having our mortgage paid off around that time would make this process easier by lowering our monthly expenses by $1,749 right off the bat — almost $21,000 a year.

We plan to retire using the 4% rule, and having fewer bills will help. Without a mortgage payment, our retirement income would only need to cover taxes, insurance (auto, health, and property), groceries, home upkeep, and other essentials.

2. We’re hedging our bets

We’re also not paying off our mortgage all at once — we’re rounding up our monthly mortgage payment by $751 to pay $2,500 per month. This means we get the benefit of paying off our mortgage early and saving small amounts of interest while also continuing to funnel additional income into our retirement accounts, as well as our Health Savings Account (HSA).

For reference, the S&P 500 went up 24% in 2023 and about the same in 2024. While nobody knows what the future holds, we can’t assume those kinds of stock market returns will continue. With this strategy, we’re making the most of every dollar.

3. We’ll save money on interest

While interest savings aren’t the main reason we’re paying off our low-rate mortgage well before the end of its term, we are saving some money. It’s not as much as we could earn if we invested the $751 we’re overpaying on our mortgage each month, but it’s not $0, either.

At the moment, the mortgage calculator for our home loan with Chase says prepaying our mortgage at this rate will save us an additional $6,494.16 in interest and cut our repayment timeline by 39 months. But this calculation starts today, and we are already a few years into our home loan.

4. We’re getting peace of mind

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A final reason we’re paying off our mortgage is the same reason we paid off the loan on our last home. We dislike debt and the stress that comes with it, and we very much prefer to live a lifestyle that’s entirely debt-free.

Even though I still had to keep up with property taxes and homeowners insurance premiums on our old property, not having a mortgage payment made monthly budgeting considerably easier. It also meant we could splurge more on certain lifestyle purchases that are important to us, including regular weekend getaways and family vacations.

While paying off our mortgage early may not be the best mathematical choice, it’s the one that will help my partner and me sleep well at night. And to us, that matters way more than just dollars and cents.