... Remember, some of that mortgage payment is against principal - you are essentially 'paying yourself' - it is adding to your net worth. Only the interest is an 'expense'.
Paying back principal does not add to one's net worth. It is "neutral" to net worth. Answer is the same whether you pay it back monthly with interest, or all at once. More importantly, the principal portion of your monthly payment is still a cashflow obligation which must be satisfied via one's withdrawal rate.
... By keeping the money in your portfolio instead of paying off your mortgage, it provides more "cushion" if you have a series of poor returns right off the bat, so your portfolio has a chance to recover. Even though you reduced your withdrawals to account for not making the mortgage payment and this would have slowed your "descent to zero" a tiny bit, having the mortgage money in your account was probably still a more powerful (positive) impact on portfolio survival.
That depends. At the time I paid off our mortgage, there were 9 years left on, what was originally, a very large 30-year mortgage. The unpaid balance was now quite small relative to our investable portfolio, less than 10%. Yet the mortgage payment (P&I only) was still quite high at about 25% of expenses. In fact, the annual mortgage payment was 15% of the unpaid principal balance at that time, and rising fast.
Without the mortgage, we could cover all our expenses with pensions, rentals, dividends, and extremely small withdrawals (less than 1%, pre-SS). With the mortgage, the incremental withdrawal rate was uncomfortably large, with significantly more early risk to portfolio survival.
I do think the historically low interest rates available over the last few years have created a unique opportunity that might warrant some degree of voluntary leverage in retirement, especially if you plan to stay in the house forever. However, one still needs to contemplate the applicability of FIRECalc's rich history to a future period starting with historically low interest rates and historically high equity valuations. Then consider the leverage decision in the context of your overall financial situation and risk profile. In my case, I had considered refinancing the remaining small mortgage balance at 3.375% for 30 years, but I ultimately concluded that was simply adding an unnecessary risk and uncertainty to a game I had already won.
