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iQuestions Faculty, Ron Blue 
 
 
Question: 
 
Should I pay off my mortgage? 
 
Answer: 
 
Not long ago, I was attending a conference and I walked into the hotel 
lobby, and a woman physician, whom I have known for awhile, 
stopped me and she said, “You know, I have the ability to pay off my 
mortgage. Should I do it?” She said, “My financial advisor tells me that 
he won’t even let me do it, because I need the tax deduction.” 
 
Well, that just about caused me to go through the roof, because I said 
to her, “Let me explain the interest deduction that you get on your 
home mortgage—in terms that maybe puts it in a different context.” 
 
I said to her, “If you loan me $1,000, I promise that I will never, ever 
repay you, and you get to write it off as a bad debt, and I have to 
include it as your income. You have a tax benefit — let’s say, 30%-
40% tax benefit, so you save $300-$400 in taxes, and it costs me 
$300-$400 in income taxes. Now, who’s better off?  
 
“Well, the reality is, I’m better off. And any time that you have an 
interest deduction, it is exactly as I described it. It’s always an after-
tax cost, even after you pay the interest. There is money out-of-
pocket. It’s better to have higher taxes with no deductions than to 
have lower taxes with a whole bunch of deductions, because every tax 
deduction costs you some money. 
 
“So, should you pay off your mortgage? Well, there’s not only the 
economic benefit of paying off your mortgage, it’s the benefit of not 
 
 
having to pay the interest, which does cost you money. But there’s 
also the psychological, there’s the marital, there’s the benefit of the 
security of knowing that nobody can ever come and take my home.” 
 
I tell people, when they pay off their home mortgage, go ahead and 
take out a home equity loan, so that if you ever need the liquidity or 
you need the cash, then you’ve got access to the equity in your 
home—but it’s only there in the case of an emergency, if you would 
happen to need it. 
 
Any time anybody has an opportunity to pay off their mortgage, 
they’re always better off to do it. 
 
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