My husband wants us to pay off our $250K mortgage balance — even though we refinanced to a 2.5% rate during COVID. How do I tell him he’s nuts?

For example, let’s say Jeremy and Becca own a home together. The married couple owes $250,000 on the property, and their rate is 2.5% because they refinanced during COVID. They have 25 years left on the original loan, and Jeremy really wants to pay it off early so they can be debt-free.

Unfortunately, Becca thinks that’s crazy given how low their rate is, and it’s become a point of contention between them. So, can (and should) Becca convince Jeremy to give up the plan or should she support her husband?

The math clearly points toward not paying off the loan

First things first. Becca is correct that hard math suggests paying off a mortgage at 2.5% would be nuts.

“At 2.5%, it almost never makes sense to pay it off early,” David Talley, CFP, founder of Talley Wealth, told Moneywise. “My own mortgage is around 2.5%. If you can reasonably earn more with the money invested than the debt costs you, keep the money growing and let it cover the interest. That’s interest rate arbitrage, and it’s what wealthy people do all the time.”

Talley explained that, in general, if the rate is below about 5% “you probably shouldn’t pay off the house,” and as for any rate that sits below 3%, “you almost certainly shouldn’t.”

Michael Schramm, CFA, founder of Emotional Finance, also did the math to demonstrate why paying off such a low-interest loan early would be a bad idea. His example assumes they have a $250,000 30-year mortgage, and they started paying $500 extra per month from day one.

“Suppose you have a $250,000 mortgage at 2.5% and an extra $500 a month to put toward it,” he told Moneywise. “You’d pay the house off almost 13 years early and save about $47,600 in interest.”

While that may sound good, Schramm went on to explain that you could also invest that $500 in an S&P 500 index fund.

“The index has returned roughly 10% a year since 1928, although those returns aren’t guaranteed, so let’s assume a more conservative 7%,” he said. “If you instead invest the money at that rate, you’d come out roughly $248,000 ahead after 30 years. And that even assumes you’d invest your full mortgage payment once the house was paid off.”

Becca can, and should, point out to Jeremy that, if they focus on paying off the home loan early, they could cost themselves almost a quarter of a million dollars. That simply doesn’t make a whole lot of financial sense.

Money is also about emotion

While Becca has the better argument if you’re looking at math logic alone, it’s worth remembering that your personal finances aren’t just about what works on a spreadsheet.

“Money is as emotional as it is mathematical,” Schramm said. “Many people feel the weight of debt, especially if they grew up under scarcity or live with intense financial anxiety. If you care about the emotional relief of living in a home without debt, then by all means ignore the financial return and make that decision.”

Before Becca gives in to that, though, Schramm suggests that Jeremy try to work through his emotions about the mortgage so he can feel safer making the mathematically sound choice. Schramm said this could involve thinking about the emotions attached to their debt, journaling and processing those emotions, and potentially working with a financial therapist.