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Comment by what_is_orcas | Hacker News Reader

I think about this a lot. Of course, on paper it's a terrible idea to pay off a mortgage early (assuming a reasonably low interest rate). On the other hand, my mortgage is my only really significant monthly expense and not having that monthly expense would reduce my dependence on a moderately high developer salary and I'd feel more capable of either changing careers or being self-employed.

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It depends on your mortgage rate and opportunity costs of other investments.

If you have a mortgage below the rate of inflation, that’s almost free money. Your fiat could potentially do better invested in assets with greater return potential. Paying your mortgage down is like a bond with a guaranteed rate of return, and the piece of mind you have from owning the house unencumbered might be worth the opportunity cost of missed returns depending on your risk tolerance, how well you sleep at night, and your desire to have a lower burn rate to enable more daily freedom (versus working a job you don’t care for to pay for bondholder returns on your note).

Less risk = pay the mortgage down or off. More risk = invest spare cash in investments.

(not investing advice)

Except my stock portfolio is down 30% and if I’d paid my mortgage off instead, I’d have several thousand dollars a month I could use to buy stock while the market is down, potentially realizing an even better return.

But the big thing we miss about these calculations is that if you’re well off enough to be thinking about the difference we’re already doing a lot better than the people who really get hurt in a recession so the biggest lesson is probably to be grateful for what you’ve got and do your best to look out for people who are less fortunate.

I am not a registered church person and this is not spiritual advice.

That’d be timing the market, which is hard to do. Your ongoing allocation strategy should be based on your overall financial goals, and if your goals or the macro changes, that’s when you pull the sails and adjust your tack.

Being financially independent allows you to do good from a position of power. “Fuck you money” is for the pre enlightened, you want “Do good money”, which means enough wealth to support yourself and then pouring the rest into those in need (if that’s your thing). The wealth, most regrettably, is a necessary evil in the current socioeconomic construct.

(YMMV, n=1)

> Of course, on paper it's a terrible idea to pay off a mortgage early (assuming a reasonably low interest rate).

Why? The longer my mortgage lasts, the more interests I'm paying (no matter how low they are). If I could pay the entirely of my mortgage now, I would because it will be cheaper.

I don't think rich people (the really rich ones) pay their houses valued in 1 million, via mortgages. They pay them upfront (because they have the money). Why on earth would they apply for a mortage that lasts 10-20 years? They would end up paying 1 million + interests.

My mortgage is at 2.625%. If I have the cash, even 1 month T-Bills are paying a higher rate than that (about 3.6%). Assume I have the cash to pay it off -- I'm strictly worse off if I pay off the mortgage vs. even investing in 1-month t-Bills.

Close. Depends on your marginal tax rate and returns post tax compared to the debt rate of interest. At higher tax rates, it gets closer to being a wash with the spread still low. If risk free rates continue to rise, the investment vs pay down benefit becomes more clear.

Wealthy people have access to lines of credit, secured against their wealth, at low interest rates unheard of to us common folk. This further widens the spread between a very cheap mortgage, and the average 6-7% expected returns from investments (which in turn are taxed cheaply at cap gain rates).

There's still better options. You can get a low interest loan against your portfolio. That way, your portfolio is accumulating interest faster than the loan rate. At Merrill Lynch, this is called a LMA, loan management account[1].

I'm not rich, so I'm not sure what other options the wealthy have.

[1]: https://www.ml.com/solutions/lma-account.html

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