Usually when we think about paying off mortgage it always seems a good idea as this is one of the biggest debt for most people. I was curious if there are any disadvantages of paying off mortgage excluding reasons:

  • You should pay off high interest debt first such as Credit Card debt, other debt.
  • You should invest first if your investment rate of return is higher than your mortgage interest.

I'm looking for more information on item listed below and other disadvantages:

  • Tax treatment / capital gain when you sell your house.
  • Anything else...
  • This is hard to consider in the broad sense, since it will depend on context (i.e. if you have other debt). Also, on what your criteria are in terms of how you make decisions (one person's "advantage" might be someone else's "bad idea.") Can you clarify a little what you're looking for? Or give some details on the scenario(s) you're considering?
    – dwizum
    Mar 10, 2020 at 14:42
  • Do you mean in terms of paying extra every payment to pay it off faster or you just came into a lump sum and can pay the entire mortgage off now?
    – pboss3010
    Mar 10, 2020 at 15:01
  • @dwizum I was asking in general sense, probably you can term them as 'probably disadvantages'. To branch the question here lets consider there is no other debt. Let's say if I want to buy a bigger property by selling my existing home. What would be the difference between if I had paid off mortgage vs. mortgage on property? Mar 10, 2020 at 15:06
  • @pboss3010 combination of both without incurring any early payment charges from the lender. Mar 10, 2020 at 15:08
  • What would be the difference between if I had paid off mortgage vs. mortgage on property? now that's an answerable question, but I think the answer is underwhelming ("a little less paperwork at closing").
    – dwizum
    Mar 10, 2020 at 15:08

1 Answer 1


There is no different tax treatment for a paid for home versus a home with a mortgage.

As a big advocate of not borrowing money for any reason, I can only think of one disadvantage of having a paid off home.

Assume you currently own a home with a 100K mortgage, and enough cash to pay off the mortgage, in fact you have 500K in cash. But you want to upgrade. The upgraded home will cost you 500K.

If you paid off the mortgage on the existing house, you would not have enough to buy the new home for cash, without a mortgage. You would have to go through the hassle and fees of getting a 100K (or more) mortgage. Also you can no longer negotiate as a cash buyer (which is very powerful).

This disadvantage becomes moot if you do not intend to upgrade for some time, or you don't have enough cash to buy the upgrade anyway, or if you have enough cash for the upgrade and paying off the home.

So unless that situation applies to you pay off the mortgage as fast as you can. Its wonderful not working for the banks.


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