So we’ve got a FIXED 2.25% mortgage rate, and I keep going back and forth: pay it off early or keep investing? The math says invest. $SCHD, for example, yields 3.93% currently and my mortgage costs 2.25%. Over many years, investing that extra money could mean $100K+ more wealth. Plus my investment account is liquid if life happens - I can access it in 2 days vs jumping through HELOC hoops at 8% interest. But then you read Morgan Housel talking about things you can’t quantify on a spreadsheet. Like the peace of mind of owning your house free and clear. Never worrying about it being taken away (except for property taxes). That psychological benefit is real but hard to assign a dollar value to. My thinking: Build up the taxable account until it equals what I owe on the house. At that point, I could theoretically pay off the mortgage anytime I want (yeah, there’d be some tax implications, but still). The taxable account should keep growing even if I used it to start making mortgage payments, so I’d end up with a paid-off house AND leftover investments. Still torn though. The math says arbitrage that cheap debt. The peace-of-mind part of me says just own it outright. Does a taxable account that equals or exceeds a mortgage balance = a theoretically paid off house? What would you do? 🤷♂️
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Carter the Investing Cat@takoyaro · 1yr
It not what I think you should do… it’s what I did. My mortgage was 3.25% and easily beatable in the market. However, I started paying extra each month without decreasing my allotments to my brokerage account. I was able to pay my house off in less than 9 years. Two things happened… peace of mind owning the house outright and my cash flow definitely changed. I was able to increase my allotments to my investments, decrease the amount I kept in an emergency fund, and had a higher level of pride afterwards. On paper it may make sense to carry the mortgage and invest the rest, but I don’t regret paying off my house.
Mitchell McKenna
@mitchmckenna · 1yr
Russ it’s not SCHD 3.93% dividend vs the 2.25% mortgage. It’s SCHD 10% total return vs mortgage 2.25%!
Aus
@bigvladdydaddy · 1yr
I’m not at this stage of life yet, but have given it considerable thought for when we do have a mortgage. My thought process is to continue to contribute 10-15% of my income to investing while chunking down the mortgage to pay it off. At that point, i could act like i still have a mortgage and just use that old monthly expense as investing money and really up my contributions. It makes sense to me, but everyone has their own motives! I may feel alot different due to rates being 6-7% 🤷🏻♂️
Moises Fermin@cryptomo360 · 1yr
In most situations for most people it rarely ever makes sense to pay off that mortgage early. It's not the worst thing in the world to pay off the mortgage early, but you don't gain a whole lot for paying that mortgage off early when you compare that to how much you're gaining from investing.
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