The Ideal Pace for Paying Down your Mortgage

The answer depends on 3 main factors:

  1. The total debt
    1. This is largely redundant, but the cost of debt changes relative to this value.
  2. The cost of debt
  3. Revenue from the debt
    1. If you couldn’t buy exactly enough for your needs, nor use all of it, all the time, there should be some revenue from your property.
    2. Deduct costs normally covered by rent. Condo fees, for example.

Taking those values, we can project the cost, or earnings, of the investment.


As shown in the chart above, there is an equilibrium rate that would offer a steady return, no matter how much debt. As the relative return decreases, the cost of debt decreases equivalently. The two other patterns offer radically different reactions. If earning less than equilibrium, it would best to move rapidly through the steep part of the curve. Conversely, if you earn over equilibrium, make only the regular payments, and focus on other opportunities.

Given the impermanence of any situation, these patterns also suggest it would be best to make lump sum payments while revenue is low. If you unexpectedly end up with roommates or some other income stream, you won’t be stuck with higher payments when the incentives flip.

Comparing to renting

Some recommend you compare the cost of rent to owning, but rent environments adapt relatively quickly and it is much cheaper to switch for better rentals. If the house can’t stand on its own, as an investment, then you probably shouldn’t buy. Handypeople may feel more inclined to own, for the control, but there are many rental opportunities where you could capitalize on such skills. In other words, most advantages applicable to home ownership could be applied to renting, with a little effort.

Sales aren’t always profitable

It is also dangerous to expect profit from a sale, there are significant closing costs and many circumstances where market challenges can consume much of the remaining gains. I am not suggesting you won’t profit from a sale, but it is not an amount I would depend on for any financial plans.


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