Olivia Says, “Don’t Pay Off the Mortgage”

Vern Sumnicht CEO \ CIO |

Jack and his wife Olivia had a fixed-rate mortgage. Jack was worried because interest rates and inflation were going up, and he wasn't sure what to do. One day, Jack received a windfall of money, and he didn't know whether he should use it to pay off his mortgage or invest it in other opportunities.

Jack was thinking about surprising his wife by paying off their mortgage. However, he decided instead to seek advice from his very wise wife, Olivia. Olivia asked Jack to think carefully about their financial situation, goals, and risk tolerance. After careful consideration, Olivia advised Jack that paying off the mortgage may not be the smartest decision.

Olivia explained to Jack that if the interest rate on their mortgage was relatively low, it might not make sense to pay it off early especially if inflation was increasing. They wouldn’t be able to get another mortgage at a low rate in the future if they paid the current mortgage off. Besides, high inflation means the bank is continually getting paid back in dollars that buy less every year.

Olivia also advised Jack to consider other debts they might have, their financial goals, and risk tolerance. She suggested that if they had other high-interest debts, such as credit card debt, it might be more beneficial to pay off those debts first. Additionally, other financial goals, such as saving for retirement, might be more beneficial in achieving their long-term goals.

Finally, Olivia reminded Jack that having an emergency fund was crucial, and they should consider using the money to establish one to cover unexpected expenses.

Thanks to Olivia's wise advice, Jack decided he wouldn’t pay off their mortgage early. He carefully weighed his options and made a decision that aligned with their financial situation, goals, and risk tolerance. He felt confident that he had made a smart financial decision and was grateful for Olivia’s wise guidance.