Dave Ramsey says paying off a home mortgage is ‘liberating’

I just got done listening to Dave Ramsey tell Greg from Spokane how important it was to pay off his house. His accountant told him that since he was paying 2.5% interest, it would make more sense to put the money in a high-yield savings account. Jade told him that was really bad advice.

Is it? Our high-yield savings account pays 3.4%. Most pay more. Greg’s accountant is correct.

Dave told him once he paid off the house, he could “use that old house payment and use it to get rich with.”

Greg’s house payment is $1,700. Dave told him that once he pays that off, he should get with a Smart Investment Pro and set up a mutual fund account. Then set up an automatic draft of $2,000 from his checking account to his mutual fund account.

First, not having to pay a $1,700 mortgage payment doesn’t free up $2,000. It frees up $1,700. Except it doesn’t even do that. Until you pay off a mortgage, lenders require you to wrap homeowners insurance and property taxes into the mortgage payment. That money is held in an escrow account, and the lender pays those two things when they’re due. On average, about a third of your mortgage payment goes to homeowners insurance and property taxes. Even when you pay off the mortgage, you still have to pay homeowners insurance and property taxes.

Dave never talks about this.

Here’s the video of the call: