It seems obvious that you should always pay off your debts as soon as
possible, but there actually are some situations in which paying off
one’s mortgage might not be one’s top priority.
A mortgage, for example, might pay for itself if the rate of inflation exceeds the interest rate. And, indeed, this has always been the case: The store value of money is 2.5 to 3.5 percent; rarely has it gone higher than that. Interest rates are at record lows and, not unrelated, inflation has been high due to the Federal Reserve’s two rounds of quantitative easing.
Take the growth rate, plus the cost of inflation in adding those numbers, and that is your interest rate. Today it’s a borrower’s market. By borrowing money now, you can save money when rates go up. For example, a 40-year mortgage will have doubled in value by the time it reaches maturity simply because of inflation. Meanwhile, you’ve been using the house effectively for free!