How do I look at a mortgage from a distinctly biblical worldview? Should it be my goal to pay it off?
My friends, Lindsay and Lindsey (yes, they know), got quite a gift from God a few months ago. Twin baby girls. The girls are precious, and pretty rare — only 2 percent of U.S. births are multiples.
A few months later, the couple gave themselves another gift and placed themselves in another select group. They paid off their mortgage — a feat that, according to the U.S. Census, only 6.2 percent of homeowners in their age bracket (25-34) have accomplished.
Not only is Lindsay and Lindsey's accomplishment rare, but it's becoming more and more counter culture.
Check just about any secular financial resource and you'll find that paying off a mortgage — which used to be the ultimate fulfillment of the American dream — has plummeted in popularity.
"These days, there's rarely any reason to rush to pay off the mortgage," says Kiplinger.
"Pay Off the House? Not So Fast!" says Business Week.
"There's no reason why people in their 20s or 30s or even 40s should pay off their mortgage if they're not planning to retire before 65," says USA Today.
And, yet, many in the Christian financial community, Mary Hunt, Dave Ramsey and Crown Financial Ministries included, encourage Christians to make mortgage repayment a priority.
Why the difference?
Is there something that the Christians just don't get about personal finances? Or is it the other way around? Are the Christians just a little too uptight about debt? Or is it that the world isn't uptight enough?
Recently my husband and I have been taking a closer look at our mortgage to find out.
The World's View
My summation of most secular financial experts is this: You can get a better return on your money somewhere other than paying off your mortgage.
Here's how a writer put in on CNN Money: "If you're still working ... hold off using any extra cash to pay off your mortgage until you explore other investments. If you've got time on your side, then you'll likely do better in stocks or mutual funds."
That's pretty much it: Your money will "make" you more money if you place it into retirement accounts, college savings accounts or investment accounts, not your mortgage.
So how is a Christian to respond to that? We know that God wants us to be prudent, wise and good stewards. If one way makes more money than the other, isn't the answer obvious? Not necessarily.
For me, there were two important biblical principles that needed to be addressed.
I've always pretty much taken it for granted that even if the stock market wasn't a sure thing, it was as close as you could get to one. Especially if you invested for the "long haul." But I've been rethinking that.
Yes, historically, the stock market has done well — averaging a 10.4 percent gain since 1926. Sounds good, huh? After all, that's certainly more than the 6 or 7 percent I'm paying out in my mortgage.
But it's not as simple as that. The stock market is about timing — when you get in and when you get out can have a tremendous effect on your returns. Then, there's the fees. Mutual fund managers have to be paid. So do stock brokers. These fees can eat seriously into your profits.
Does that mean I'm anti-stock market now? Certainly not. I'm in, baby! But I'm in with caution. As Gillette Edmunds, the author of Retire on the House, said: "The problem is that mortgage interest is a sure thing and the investment isn't. You could lose everything you invested and still have to pay the mortgage."
This is where James 4:13 has really shaped my thinking. I don't know what is going to happen tomorrow, but I have made my mortgage obligation today. God takes my debt seriously, and so should I.
Instead of taking an "either/or" approach to investing and our mortgage, my husband and I have taken a "both/and" approach. That is, we consider both a priority. We invest in his 401(k) (mainly because of the employer match), but consider paying off our mortgage an important part of our investment strategy as well.
After all, why hope that I will earn 8 percent in the market to cover my future mortgage payments? Why not just pay it off and make my 6 percent today?
But what about losing my tax deduction for mortgage interest? As Crown Ministries points out: Why would I pay $1,000 in interest to the mortgage company just to get $360 back from the government? I'm still out $640. Better to pay off the mortgage, pay the $360 and get to keep my $640.
But what if I were guaranteed a better return on my investing than on my mortgage? Would I still want to pay off my mortgage? I think the answer is still yes.
This hit me the other day when I was reading the Washington Post. The article was on "Mortgage Moms" — the new buzz demographic for political elections.
According to the article, "mortgage moms" are voters "whose sense of well-being is freighted with anxiety about their families' financial squeeze." What financial squeeze?
The answer: their debt. According to The Post, the amount of mortgage debt in America has more than doubled since 2000, to nearly $9 trillion. This year, about $1 trillion of that debt will readjust to a higher interest rate for the first time — leaving those moms and dads with even higher mortgage payments.
Here was the clincher line: "Democrats are betting that this factor is strong enough to trump security or cultural values issues." Unfortunately, I think they're right. And I think this is part of what God is trying to warn us about in Proverbs 22:7.
You are a slave to your lender in a literal sense — you're working and the money goes to him. But you're a slave in another sense. Your will is no longer your own. You may have priorities — family, faith, values — but those priorities must take a back seat to your overriding concern: paying back what you owe.
In America, we've convinced ourselves that there is "good debt" and "bad debt" and that mortgages fall securely into the good column. But I think we also need to consider the size of the debt.
Which will cause you more stress? A $1,000 loan you took out for a TV (definitely bad debt — don't do it!) or a $250,000 mortgage on your house? Which may cause you to change your priorities? To work when you should be worshipping? To neglect God's call on your life?
Sometimes debt is just debt. And it can make us a slave to it.
But the opposite of slavery, of course, is freedom — which is exactly the word Lindsey and Lindsay use to describe how they feel now that they are mortgage-free.
"I could quit my job tomorrow and go work at Subway and still support my family," Lindsay laughs. "There's such freedom in that."
"It does not take very much money to live if you are not paying out the majority of your income for housing," agrees Carolyn J. White in her book, Debt No More.
So, my husband and I are making the commitment to pay off our mortgage early. Not as early as Lindsey and Lindsay, who are my current heroes, but sooner than the 30-year term. How are we going to do it? How did the Lindseys do it? How can you do it or, if you don't have a mortgage yet, how can you start preparing for it? That's the topic for next time.
Part 2: Mortgage Free ... How Can That Be? »
Copyright 2007 Heather D. Koerner. All rights reserved.