There are three instances where paying off a mortgage is a mistake.

Many personal finance experts extoll the virtue of being mortgage-free. I agree that, for many people, paying off the mortgage is a great move. While it may not always maximize your return on investment, the payoff of having no more mortgage can be substantial. Chief among those benefits is peace of mind. It’s hard to put a price tag on that. And this is why so many of us want to pay off our mortgage as soon as possible

Having said that, there are three instances where paying off a mortgage is the worst mistake a person could make. Let’s go through these one by one:

1. Significant Life Changes

If you are going through some big personal changes (or are about to), don’t pay off your mortgage. A few years ago Jeanie lost her husband of 30 years. She considered an early mortgage payoff. but it would have been a mistake. Why? Because she didn’t really know what her financial life was going to look like 12 months down the line. She needed to remain flexible.

Of course, her natural inclination to pay off the mortgage was understandable. When life seems to be spinning out of control, we desperately try to regain control over those things that seem controllable.

In this case, the future was so uncertain for Jeanie, she had no business making large financial decisions. If you face a similar situation or are planning other life changes, like looking for a new career, refrain from paying off your mortgage until your situation becomes easier to see clearly.

2. Can’t Afford to Feel Good

Paying off your mortgage is a great feeling, but sometimes that good feeling is just too darn expensive.

Tom called me yesterday and he wants to retire in two years. He has a mortgage of $100,000 and the interest rate is only 3.5 percent (after tax benefits). He asked if it made sense to pay off the mortgage.

He is currently only 63 years old and estimates that over the next 10 years he’ll earn, on average, 6 percent (after tax) on his investments. Tom is using his current investments to create income and relies on that income. If you look at the numbers, you’ll see that he expects to earn 2.5 percent more on the money than the cost of his mortgage. That’s about $2,500 a year, and Tom needs that extra income.

You can see that while it might feel great for Tom to pay off his mortgage, it would take $2,500 out of his pocket, and he simply can’t afford to cut his income by $200 a month.

3. Spending Problem

Often, when people pay off their mortgage, they feel free to spend the money that was going towards the payments. In some cases this is OK, but certainly not in all situations. A house payment can act as a forced savings plan for many of us. If you take away that mechanism, sometimes folks go spending happy and it can lead to a disaster.

Laura’s husband passed away while they were both at the height of their careers. He left her enough life insurance to pay off the house, which was great. But after she paid off the house, she went on a shopping splurge. She didn’t understand that in order for her retirement plan to work, she was supposed to take the extra cash flow and save it.

Besides putting a dent in her long-term retirement plan, she’s developing bad spending habits that can reduce her future plans to rubble.

Paying off your mortgage is great. If you can do it and it makes sense, I suggest you go for it. Just make sure you create a plan that makes sense, so you make good decisions with the added cash flow after you do so.

Neal Frankle is a Certified Financial Planner in Los Angeles and authority blogger at www.WealthPilgrim.com. One of his most current posts was his Perskstreet Review .