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Comment by vvpan | Hacker News Reader

I wonder how many of those people are paying off mortgage with what would be their savings.

You should be able to pay off your mortgage and still maintain & increase savings. If you can't, you have too much mortgage.

Is there a reason, generally speaking, why you shouldn't use the excess money to pay off your mortgage faster, rather than increasing savings?

(Assuming you already have enough savings to cover emergencies etc)

If your mortgage interest rate is less than your investment account rate.

After tax. Adjusted for risk.

There's also the liquidity angle (which might be mitigated on the pay the mortgage early side with a LOC).

I've been overpaying on my mortgage by 150% all year; that's the money that I would otherwise have saved. Savings account would give me 3% tops; stocks would give me more but not risk-adjusted more. Paying my mortgage off early is 4.2%, risk-free.

Am I being dumb? It's quite possible there's something I've missed.

Long term fixed rate? Why bother paying early. Interest rates must rise eventually. If even if they don't the future dollars are much cheaper anyway becuase inflation won't stop. In real terms, your interest rate goes down every year, to the point where is can reach 0 or negative. Locking the money in the house means opportunity costs to take advantage higher rates later.

Medium-term I guess. I've got 2 years left on the fix, then it floats.

Everyone says rates have to rise eventually. But so far we've gone 7 years of near-zero rates. If there were a dramatic shift I could take a payment holiday and put it all into savings, but I doubt I would. As for inflation, it affects any form of saving equally - nominal 4% interest is better than nominal 3% whatever that is in real terms.

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