575: Should You Pay Off Your Home?

That's a question I get a lot from investors, and the answer isn't as simple as the math might suggest. For years, the calculation was pretty easy. When mortgage rates were extremely low, borrowing money was cheap compared with the returns you could reasonably expect from investing that capital elsewhere. Even today, with mortgage rates above 6%, you can still make a mathematical argument for keeping a mortgage and investing your money instead—particularly if you believe your investments will compound at a higher rate over the long term. But let's take the math out of it for a moment. There's also a powerful psychological argument for owning your home free and clear. No mortgage payment. No worrying about whether your investment income will cover the house if your cash flow suddenly drops. Whatever happens in the markets or the economy, you know you have a roof over your head. For some people, that peace of mind is worth more than squeezing out a few additional percentage points of return. The obvious downside is that you may have hundreds of thousands—or even millions—of dollars of equity trapped inside your home. But what if there was a middle ground? In my recent conversation with a reverse mortgage expert, I learned some things about these products that genuinely surprised me. For example, did you know that with certain reverse mortgages, you can establish a line of credit and not use it at all? And while it sits there unused, the amount available to you can actually grow over time—potentially at a rate around 6% depending on prevailing rates and the terms of the loan. I had no idea. That creates an interesting possibility: owning your home without a traditional monthly mortgage payment while still maintaining access to some of the equity you've built up. Reverse mortgages have been around for years, but I realized there was a lot about them that I simply didn't understand. This week on Wealth Formula Podcast, I sat down with a reverse mortgage expert to separate fact from fiction and explore when this often-misunderstood financial tool might actually make sense.