Should You Pay Off Your Mortgage?

Even in the current tax climate, homeowners may be better served by refinancing at a lower rate and investing the savings.

- Nathaniel Wice

WHO WOULDN’T WANT to retire debt-free, especially with the peace of mind of owing nothing on one’s own home? The mortgage-burning party was such a feature of home ownership 50 years ago that there’s even an All in the Family episode from 1975 in which Archie and Edith gather neighbors and friends to proudly celebrate owning their house outright. But it’s hard to imagine a similar scenario in a Modern Family episode today, unless it somehow involved the sitcom father dads plaining the ancient rite and accidentally torching the lawn.

The disappearing custom owes in part to the rise in refinancing, as lower interest rates have made it less expensive to carry more debt for longer. When rates are relatively lower—as has happened dramatically at various points since the 1980s—mortgage borrowers who lock in a new lower rate also tend to restart the clock of a 15-year or 30-year mortgage when they pay off the older mortgage. (You don’t always have to restart the clock. Some lenders offer a “rate modification” or “float down” that saves on refinancing fees and merely amends the existing mortgage with a lower rate rather than writing a whole new mortgage; always find out if that’s an option.)