The other thing I can't quite understand is the desire to have a fully paid off house - do people really think that when they need the money in the house a bank is going to just throw money at them with little or no income? Maybe 5 years ago, but certainly not now. Banks like to loan money to people who don't need it, not the other way around.
I know I feel a lot more comfortable with a relatively small mortage ($150K or so - and for the Wash, DC area, that's tiny) and know I have the money in case of an emergency. If it's all in the house, how do you get at it??
For some of us, it's not really the idea that we're going to take money out of the equity in our house for an emergency, but that we don't have to generate the income to make a monthly house payment. That makes our current cost of living much lower having a house that's paid off and makes us feel more comfortable. I'm guessing with a mortage of $150,000, you're paying $800-1000 or more per month. That's one expense I don't have to worry about right now. It might not make the best financial sense to have a house paid off vs. having a mortgage and investing the money that might have been used to pay off the mortgage but the feeling of not having that money go out every single month is worth a lot. There are other threads here on paying off a mortage, so I guess I don't want to start a new one...just explain why some people pay theirs off early.
Another thing, my house is only valued at around $130k...in California, I'm guessing the same house would be valued at $500k or more. I might be more concerned about getting ahold of the equity if I had $500k tied up in a house. Different market, different view of the equity.