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<<, if you can take in 5.5% with one hand and pay out 5.12% with the other, it is to your advantage to keep the mortgage. >>

The best reason to not pay it off is options.

With cash in the bank you have more options available to you than if you have no cash and a paid-off house.

Assuming that you can make the payments, you have much more freedom of action with the assets in liquid form. My mom and all her siblings learned this the hard way a couple of years ago, when my Uncle had emergency unexpected quintuple heart bypass surgery, a very expensive free-and-clear house and very little liquid assets. Try getting a home equity loan to pay for post-operative care when you are in a hospital bed with tubes coming out of you.

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