Paying off your mortgage on a property...

5 Replies

Hello BP'ers. My name is Yair and I was listening to a podcast and the guest said that they NEVER pay off a mortgage on a property. Can you share the pro's and con's to doing this? I thought that was the goal so that you can make more from the property.?  did they mean an investment property only or the property you actually live in?

thank you all in advance.

There is no right or wrong answer to this. It depends on your goals and your threshold for risk. The podcast may have been talking about investment and personal homes.

The argument for not paying them off is that if they are paid off, you have all this equity sitting there doing nothing for you. You could take that equity and purchase more properties. Also, when you have less equity, you're less appealing in a potential lawsuit.

However, some want the equity to have significantly less payments each month. Without a mortgage, one only needs to pay for taxes, insurance, repairs, capex, vacancies, etc. 

@Yair Tapia

I think what @Nicole A. said was spot on especially when she says that its all investor preference..  I have read posts here on BP where some investors only want to have a couple of properties so their objective is to pay off the mortgage in order to increase their cash flow.  On the other side, there's investors on here that continue to do cash-out refinances in order to access the equity and turn that into cash so they can fund their next investment.  With all that being said, there's not necessarily a "right" or "wrong" answer here.  Hopefully you find this helpful!

As others have said, its all about your investment plan. If your plan is maximum growth, equity costs you money, so paying off properties slows you down. If you are looking to increase cash flow to live on and are not in growth mode, paying off properties will help you achieve that.

Keep in mind that your goals may change a bit over time too! You can always start out with one method, and later decide to change gears.