Dear Chuck,

I want to pay off my mortgage! My financial advisor says no since I am 1 year into my cancer healing journey and about to be laid off in June. But I’ll have 6 months savings in my emergency fund even after paying off my mortgage. Should I be debt free or hold off?

Nervous Mortgage Holder

Dear Nervous,

Praise God a year of cancer is behind you! That certainly must have impacted your priorities.

I can understand your desire to pay off that mortgage, especially before being laid off! It’s admirable that you have enough saved to pay off your mortgage AND have an emergency fund with 6 months of living expenses! Your faithfulness will serve you well as you navigate these difficult circumstances.  

For your situation, I would consider how long you conservatively believe you will be unemployed and what insurance and medical expenses you will be facing. You will need a larger emergency fund if unemployment is likely to be for an extended period.   

You want your emergency fund to include enough money to cover true emergencies (including the loss of income). This means, even with your mortgage paid off, you need enough money to cover property taxes, insurance, utilities and emergency home repairs. In addition, food, transportation, insurance, medical bills, and personal expenses have to be covered as well.

Without knowing the details, I would suggest that you save 18 months of funds saved when your employment ends to cover your expenses and any expected out of pocket expenses for health issues.

Assuming you have a low-interest rate on your mortgage I would recommend you continue your monthly payments and try to build that emergency fund. By continuing to make mortgage payments, rather than paying off the house right now, you will have a cushion to carry you until you land your next job. This margin will help you avoid extra stress. Once you start a new job, you could pay the mortgage off while continuing to save.

This chart offers pros and cons of mortgage payoffs. You may want to read about mortgage refinancing or recasting options as well. When considering paying off a mortgage, I always advise:

• Having sufficient emergency savings.
• No additional debt. (If you have credit card debt and need help paying it off, get in touch with our partners at Christian Credit Counselors.)
• A maxed out retirement savings plan.

If I understand your scenario correctly, you may be able to achieve these savings goals then pay a significant amount of your mortgage off and reduce your pay-off timeline. This may be the best case option for you now.

A year into your cancer journey means you probably went through some fearful times yet you are still faithful to manage your finances like a good steward. Well done!  

Often we fall into the trap of making financial decisions motivated by fear instead of trust in God. But we read in Hebrews 11:1, Now faith is the assurance of things hoped for, the conviction of things not seen. God knew we should have some needs in order to develop faith in Him. It is necessary that we view our future needs as opportunities to exercise and develop our faith.

Thank you for reminding us all to put our faith in God – whether it’s with our finances, health, or future.

Also, thanks for writing and let us know how you are doing.

Originally posted on the Christian Post, May 18, 2018