Do you have 1 million dollars, should the loan be paid off at 3%?

For many homeowners, a mortgage rate of 3% feels like a game-changing opportunity. Given today’s higher interest rates, financial experts like George Kamel and Jade Warshaw recommend that individuals in this situation consider paying off their low-interest mortgage with available cash.

A caller named Dan from Washington, D.C., shared that he and his wife suddenly earned over 1 million dollars from a lucrative business deal. After paying an average of 200,000 dollars in income and 130,000 dollars in consumer debt, they were left with only a 260,000 dollar mortgage at a 3% interest rate. Considering retirement, Dan asked how to best utilize these new funds with the goal of retiring at the age of 55.

Kamel noted that while the 3% mortgage interest is lower than today’s savings yields or long-term market gains, he advocates for paying off the mortgage immediately. According to Kamel, the benefits of eliminating debt go beyond mathematics. “Mental peace” and “risk factors” are fundamental reasons for removing the debt. Once the mortgage payment is gone, it will provide the couple with additional cash flow that they can direct toward retirement investments.

Warshaw added that being mortgage-free rarely leads to regret. Kamel and Warshaw recommended spreading the leftover money across several long-term priorities. First, they suggested making a prepayment on a 529 education plan, considering Dan's 13-year-old son already has 30,000 dollars saved, with an additional 40,000 to 50,000 dollars recommended to be added. This way, the account can continue to grow without excess balance becoming an issue.

Second, they emphasized maximizing tax-advantaged accounts. In addition to increasing contributions to the wife's 401(k) account, they recommended exploring backdoor Roth IRAs to avoid eliminating standard contributions, as well as maximizing existing HSAs.

Finally, they noted the importance of working with a consultant not just for investment management but for a broad range of financial planning. Kamel highlighted the value of leveraging a professional who can assist with not only portfolio selection but also tax strategy and estate planning.

For callers like Dan and many others locked into historically low mortgage rates, paying off a mortgage may initially seem illogical, but the Ramsey team focused on the freedom that comes with eliminating debt: flexibility, lower risks, and a faster pathway to retirement.

Whether this approach is right for everyone depends on individual goals and financial security. However, in this case, the experts’ advice was clear: if you have a million dollars, freeing yourself from a mortgage should be the first step toward long-term freedom.