6 Reasons Why We Don’t Pay Off Our Mortgage

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Mortgages, lots of people have them and the always ongoing discussion is to pay off or not to pay off. Since my husband and I are into the whole investing and FIRE (Financial Independence, Retire Early) thing, we definitely don’t pay off our mortgage early. There are a couple of reasons why.

why we don't pay off our mortgage

Reason 1: A mortgage is cheap money

Last year we bought a new house. We took a mortgage for 100% of the value of the house instead of using money we had in our savings account. We did this because of the low interest rates that we currently have in the Netherlands.

The interest rate of our mortgage is 2.2%, excluding tax benefits in the Netherlands. So depending on our income from work, it is effectively even lower. We have set this rate for 10 years, so it won’t change for another 9 years.

By keeping our money in our pockets, we can do lots of other things with the money, instead of it being stuck in the house.

Note: If you have a high interest rate on your mortgage and the rates are lower at the moment, you can look into the option of refinancing your house. You can also look for another house and have a brand new mortgage with a low interest rate on the new house.

Reason 2: Emergency Fund

When you put all of your extra cash towards your mortgage, without having an emergency fund, you will possibly run into problems some day.

In the event that you are faced with an unexpected problem and you don’t have money to fix it, you have to borrow money with probably a high interest rate. Plus you might not even be able to pay the normal monthly payment on the mortgage for one or more months. You don’t want to get yourself into that spot!

If you keep your money in your pocket, you can build up your own emergency fund. This fund helps you to stay out of debt, because you can use his money in case unexpected things happen to you. For example: you might lose your job or the car breaks down.

It’s advised to start with an emergency fund of at least € 1,000. You should keep building your fund after that to at least 3-6 months of your expenses. Some people even advice to build it up to 12 months of expenses, that’s up to you.

When you can cover several month with your savings, you will be fine if you or your spouse loses his/her job. You have time to find another job, without putting yourself in debt and facing high interest rates.

Reason 3: Other debt

Other debts than your mortgage usually come with a much higher interest rate. In that case, paying off the mortgage isn’t a smart thing to do.

Make a list of all of your debts and start paying off the one with the highest interest rate first (the avalanche method). This can save you tons of money on interest.

Reason 4: Put your money to work by investing it

For a couple of years now, my husband and I are investing in peer-to-peer lending. Our returns are way higher than the 2.2% of the mortgage. Our average is above 10% actually.

This means that we gain a lot of money by investing it instead of paying off the mortgage. So we never make extra payments on top of the normal monthly payments of the mortgage.

To give you an example:

  • Option 1: We put € 20.000 into the house, so the mortgage will lower with € 20.000. This means that we pay € 20.000 x 2.2% = € 440 less on interest per year.
  • Option 2: We put € 20.000 into investments with an interest rate of 10% (most of our investments have even higher returns than that). This way we make € 20.000 x 10% = € 2,000 per year.

Concluding: We make € 1,560 per year by investing our money instead of paying off our mortgage.

Even investments with a lower overall interest rate, like stocks, are a good option for investing. Everything above the interest rate of your mortgage will be a good option instead of paying off the mortgage.

Of course you have to consider the risks. Paying off the mortgage is risk free, while investing always comes with a risk.

Another option is to do both. Put a part of your savings into your house and another part into investing. This is a pretty save solution and it’s good for diversification.

Putting everything in your house means having too much of your capital tied up in a single asset. Balance is always important in finance!

Reason 5: Tax benefits

In the Netherlands, there is a tax benefit on your mortgage. While the interest rate of our mortgage is already low at 2,2%, the tax benefit makes it even lower.

It depends on the height of our income from work. If you don’t have a mortgage, you don’t get the benefits of course. This means even more profit when you invest the money instead of putting it in your house.

Reason 6: Inflation

The payment on a mortgage usually stays the same for a couple of years or even the whole duration, depending on what you chose.

In that case, your mortgage becomes cheaper over time because of inflation. Looking at the last couple of years, the average inflation is about 1%. So your payment of € 1000 today, is actually valued at € 905 in 10 years time!

So, this means that your mortgage payment is actually going down.


There are a number of reason that we don’t pay off our mortgage:

  1. A mortgage is cheap money
  2. Emergency fund
  3. Other debt
  4. Put your money to work by investing it
  5. Tax benefits
  6. Inflation

In the end it all comes down to what is best in your situation. If you lost your spouse for example, you may have trouble paying the mortgage each month on your own.

In that case it’s a good option to use your savings to pay off the mortgage to a level that matches your income.

Always use your head when money is involved. Think things trough and do research before acting. Everyone has a different opinion on anything that is money related.

Read different opinions and form your own. Do what feels best in your situation. You are the only one who can decide what’s best for you.

To pay or not to pay?
Let me know in the comments!

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This Post Has 12 Comments

  1. Great list. I agree with all of them. 2.2% is low. I’ve heard people say they pay above 7% in some places. Mine’s 0.4%

    Some people just can’t handle debt the same way. There’s bad debt of course, but mortgage is so regulated that it’s very cheap, especially now in Europe.

    When you do the math, investing the money vs. paying off your mortgage has a difference of easily a hundred thousand euros.

    I just wish I could refinance my home…

    1. Hi Eelis!
      Thanks for your comment. Wow, 0,4% is awesome! I’m glad that we’re not in the 7% range anymore in Europe. Hopefully it stays low, especially in 9 years when we need to renew our rate :)

    1. The amount of the mortgage doesn’t affect how we would handle it.

  2. Hi Janneke,
    I think choosing to pay off early or later can really depend on so many factors, including age, location, upbringing, family status, cost of loan etc.

    There are pros and cons to doing both. Owning your own house would be such a relief, knowing that no matter what happens to your investments (or your job), you always have a roof over your head. That is priceless (even more so with a family). On the other hand, when you invest that money, you could be making a difference of 7%+ each year, which means that you could double that money every 10 years.

    Another thought could be to set half as fixed interest for 5 years, then build up investment income on the side. Once the 5 years is up, you can walk in with the remainder of the money and close the mortgage.

    As you mention, there is always a risk, and no one knows where interest rates (both for P2P or for mortgages) will be in the next 10 years!


    1. Yep, there are always pros and cons for everything. Even when you do own the house after paying off the mortgage, something can happen, flood, fire or other drastic things. You never know.

      That’s why I like to take some risks, as life itself already is full of risks and uncertainty.

      And in the end everyone should decide for themselves what they feel is best for them.

  3. Holy crap, they allow you to borrow 100% and only pay 2.2%? That’s not bad ;)
    I was brought up believing that you should get out of debt as fast as possible – but with interest rates <2% (I currently pay 0.5%, 3-year fixed rate), it simply doesn't make mathematical sense to NOT have debt.
    The money is essentially free. I currently owe about 75% on my mortgage, and ideally I'd like to bring it down to 60% before I'd stop paying it off altogether, and use the savings to invest instead. Once I have a steady stream of passive income (or the interest rate rise), I would start paying it down again (using the passive income money, of course ;) ).
    Not everyone understands this logic though, but most people also still remember when the interest rate was 8-10%, so it's understandable that people still go out of their way to get rid of their debt (fast). I find it unlikely that the interest rate is ever going to go back to those levels, but predicting the future is of course not my line of work, so don't take my word for it :P

    1. Yep, we can borrow 100% nowadays. It used to be up to 125%, no wonder people are still having problems. So after the crisis, the government changed it and it slowly went down to 100%. Only half of it can be interest-only though. So we pay off 50% during 30 years.

      Those high interest rates, yeah I don’t see that happening again either, but we’ll never know. We will see what the future brings.

      When we’ve got enough passive income and don’t know what else to do with our money, we might also make some extra payments ;)

  4. Hey Janneke, This is a really great article. I totally agree with you that we have to pay first the high-interest rate loan instead of law rate. Definitely, the mortgage is one of a good idea if you are suffering from high-interest rate loan.

    1. Hi Juan, thank you for your comment! Yep, definitely pay off high interest loans first & stay far away from them when you finally got rid of them! :)

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