Now the harder question, and an honest disclosure: this is a case we have not built yet, so what follows is the mechanism, not a verdict with our own numbers behind it.
Paying off a low-rate mortgage early is a trade between two things. On one side, a guaranteed return equal to your mortgage rate: every dollar of principal you retire is a dollar no longer paying interest. On the other, liquidity and the chance those dollars could earn more invested. At a low fixed rate, the guaranteed return from paying off is modest, and a diversified portfolio might beat it over time, though not with the same certainty.
The part people underweight is what the payoff does to cash flow. A retired mortgage lowers the income you must draw each year, and lower required withdrawals are exactly what protects a plan during a bad market. That relief can matter more than the interest-rate comparison suggests. Set against it: the money used to pay off the house is no longer liquid, and liquidity is its own kind of safety in the early retirement years.
In our first case the household carried a $75,000 balance at 3.1%, with a $12,000-a-year payment that ends at 70. Because that payment was built into their spending, their lifestyle budget drops by $12,000 the year it ends, and “the mortgage ends on schedule” became one of the stated conditions the plan depends on. It is a good illustration of the real point: the mortgage is not a side issue. It is a scheduled change in required income, and when it ends is part of the plan.
One practical note: in the Stress Test, the mortgage payoff age is an input. If there is any chance the payoff date slips, test the plan both ways and see how much it depends on the timing.
