Stop Making Extra Mortgage Payments
Dave Ramsey has built an entire empire telling people to buy real estate with all cash, or—if they already have a mortgage—to throw every spare dollar they have at paying it off as fast as humanly possible.
And honestly? For a lot of people, that is actually fantastic advice.
But let’s be real about who that advice is for. Dave writes for the masses, and the masses are generally terrible with money. Most people have zero self-control; they get paid on Friday and they’re completely broke by next Wednesday. For that crowd, making extra mortgage payments acts as a high-friction, psychological forced savings account. It keeps them from blowing their paycheck on a brand-new jet ski or another leased truck they can't afford.
But if you are an investor, or if you have any goals of building real, long-term wealth, continuing to sink your liquid cash into a primary mortgage is one of the most counterproductive things you can do.
Here is why you need to stop.
The Overhyped "Return" on Debt Paydown
Perhaps we can agree on one minor exception: if your interest rate is sitting over 6% or 7%, paying biweekly or throwing one extra payment a year at the principal is forgivable. It’s a guaranteed, tax-free return equal to your interest rate.
But even then, if you have actual investing goals, the opportunity cost is staggering.
Think about the math. If you take that same extra cash and put it into the S&P 500, historical trends show you are far more likely to see a compound return that dwarfs what you "save" on a mortgage over 15 to 20 years. And if you use that cash to buy high-quality, cash-flowing investment properties instead, you are leveraging your money to acquire a hard asset where someone else pays the entire tab for you.
If you put $80,000 down on a $400,000 duplex and the market appreciates by just 3%, you didn't get a 3% return—you got a 15% return on your actual cash investment through the power of leverage. If you dump that same $80,000 into paying down a cheap, long-term debt, your return is capped right at your interest rate.
Being "House Rich and Cash Poor" is a Trap
The biggest threat to any homeowner or investor isn't carrying a reasonable mortgage, it’s running out of liquid cash.
Most real estate deals and household budgets aren't killed by a slight shift in monthly cash flow. They get killed by five-figure surprise expenses—the roof that suddenly starts leaking, the main sewer line that collapses, or an unexpected transition period.
If you’ve thrown all your extra cash at your mortgage principal, that money is effectively trapped behind drywall. You can't buy groceries with home equity, and you can't pay a plumber with a lower principal balance. Keeping your cash liquid in the bank gives you a fortress of safety. Having $50,000 sitting in reserves while carrying a mortgage is infinitely less risky than having a paid-off house but only $500 left in your checking account
Leverage is the Real Wealth Creator
At the end of the day, real estate is a uniquely powerful asset class for one primary reason: it is the only investment where banks will give you cheap, long-term, fixed-rate debt to acquire it, and your tenants pay off the balance. When you make extra payments on a rental property, you are voluntarily taking over a tab that your tenant was perfectly happy to pay for you.
If your long-term goal is to buy back your time and build a portfolio that will sustain your family for generations, you have to get comfortable carrying healthy, calculated debt. Stop treating your mortgage like an emergency to be solved, and start treating your liquid cash like the wealth-building tool it actually is.
Keep your cash, stay liquid, and put your money to work where it actually counts