For many homeowners, the idea of living debt-free is irresistible. Imagine wiping out your largest monthly bill and freeing up thousands of dollars in cash flow.
That’s the choice facing one couple. Both of them are 51, and with a 6.5% interest rate, they have a nearly half-million-dollar mortgage and enough cash to eliminate it today.
Should they pay off their $483,000 mortgage and enjoy the relief of a debt-free life, or put that money to work another way?
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The case for paying off a mortgage
At 6.5%, this isn’t a cheap loan by today’s standards.
The average 30-year fixed rate dipped under 6.25% in mid-September after averaging 6.8% earlier this year and 6.7% in 2024 [1].
Eliminating the mortgage payment delivers what is essentially a guaranteed return of 6.5% — something that’s difficult to beat without taking on market risk.
Other benefits include:
- Peace of mind: Being debt-free can carry enormous emotional relief [2].
- More money each month: The couple’s $3,600 monthly mortgage bill would vanish, freeing up money for saving, investing or spending.
- Risk reduction: If one spouse loses a job or their expenses spike, not having a mortgage cushions the blow. Your emergency fund also stretches further without a significant fixed expense.
The case for holding onto the cash
Parking all that money in the house comes at the cost of lost flexibility. Once paid in, it’s not liquid. Yes, you can access equity through a home equity line of credit, but this approach adds complexity and may result in higher borrowing costs later.
Currently, the couple’s savings account yields approximately $1,000 per month in interest. High-yield accounts and short-term Treasury bills currently offer returns around 4% [3]. That’s not quite enough to outpace the 6.5% mortgage — especially after taxes — but it’s close.
Long-term investments could do better. Over the past century, the S&P 500 delivered an average annual return of roughly 10% — though past performance doesn’t guarantee future results. Investing the lump sum over decades could outperform the guaranteed savings from paying off the loan. But it comes with volatility, and with markets near record highs, dropping nearly half a million dollars at once feels risky.
There’s also the tax angle: Mortgage interest is deductible for some households.
Read more: How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you’ll need a substantial stash of savings in retirement
Is waiting for lower rates worth it?
What if mortgage rates drop?
If rates fall back into the 5% range, refinancing could shave hundreds off monthly payments without giving up liquidity.
However, no one can predict rate movements with certainty, and locking in guaranteed savings now avoids gambling on future policy decisions by the Federal Reserve.
Middle ground
You don’t necessarily just have to choose between paying off the mortgage in full or keeping it as is.
Another option is to pay a bit off. For example, putting $200,000 toward the principal could significantly reduce lifetime interest while leaving cash for investing or emergencies.
This blended approach offers balance: lower debt and lower stress, but still enough liquidity to feel secure, or the ability to capitalize on stock market returns if you choose to invest the remaining money.
There may not be a single right answer. Paying off the mortgage offers a guaranteed return, extra monthly cash flow and tremendous peace of mind. Investing that cash, on the other hand, could earn you more money in the long term, but you must wait for the reward.
At the end of the day, it’s about building the financial life that feels right for you.
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Article sources
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[1]. [The Mortgage Reports]](https://themortgagereports.com/61853/30-year-mortgage-rates-chart). “Mortgage Rate History: Chart & Trends Over Time 2025”
[2]. Chase. “A look at life after your mortgage is paid off”
[3]. CNBC. “
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.