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I owe about $19,000 to USAA on my home and have about $90,000 in combined USAA savings, checking, and investment accounts. I have other retirement accounts as well as monthly income from Social Security and retirement income. My home is worth about $350,000. What would be the pros and cons of using my USAA savings account to pay off the $19,000 I owe USAA on my home?

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Thanks for the question! And let me offer some congratulations on what sounds to be some excellent financial health. Your question about paying off the mortgage is one that most strive for and many others have today. I'm a big believer in the reduction of debt - especially in retirement. Let's look at the facts. The pro of paying off the mortgage on your home is the simple freedom from owing a monthly payment. I'd also add that there is true value and peace of mind from having the mortgage liability disappear from your financial life. It is an excellent feeling that shouldn't be discounted.


However, before you take aim and pull the trigger on the mortgage, I'd want to make sure there are no larger financial commitments that you may need the $19,000 for in the near future. Things like a new roof, or other home repair or upgrade. Consider any health concerns or other financial burden on the horizon. If items like these are planned, it may be best to keep the $19,000 in your pocket to cover the repairs or upgrades - especially if you'd have to take out a loan to cover those expenses otherwise. If you have other debt such as credit cards or car loans, I'd likely set my sights on ridding those from your financial life first, as they usually carry higher interest rates than the mortgage. Note that there is an income tax deduction available for mortgage interest paid. However, my hunch is that your actual interest amount on your mortgage is a small percentage of your monthly payment by now. Mortgages are designed to have the interest paid mostly in the early years of the mortgage. With $19,000 left to go, it's likely your interest, or tax deductible amount, is low. However, it's a good idea to check out the tax issue to make sure you don't "need" the tax deduction.


So, assuming you've cleared the deck of other debts, you don't see any high dollar expenses headed your way, and the current tax deduction for mortgage interest is low or not needed, then I think you are ready to be debt free. Ready. Take Aim. Fire! I think you'll be glad you did. Let your financial freedom ring! Enjoy the next month without a house payment.

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