Originally Posted by
Gunfighter
This post, especially the bolded part is likely where some of the paid off mortgage opinions differ. Old guys like me (GenX) are more likely to be sitting on sub 3% mortgages and can get a better return on cash than paying down a mortgage. Millennials and GenZ are more likely to have newer mortgages at 6% where the math is different. A sub 3 mortgage offers a 7% spread to the S&P historical returns. A 6% mortgage only offers a 4% spread. Said differently, my "risk free rate of return" is 2.25% by paying off a mortgage. Verdell gets a 6% "risk free rate of return".
I'd been a no car payment guy for years, but in 2022 money was free (1.9%) I hate having a stupid car payment, but he!! if I'm taking money out of a money market account to pay it off. I'm just letting it ride for another year or two. Yes, I tried the all cash option, but the dealership makes money originating loans. My latest car purchase, I got a better deal by taking a 6% car loan, then paid it off a week later with cash. That was my 6% risk free rate...
100%
As a Gen X myself, I've lived on both sides of this financial conundrum, as I'm sure others have. 10 years of a 2.75% mortgage that I never tried to aggressively pay down. But then life happened and a move was required. Housing prices rose, and I was sitting on a sh*ton of equity. So I had a choice of things to do with that equity when I moved.
I could either invest all that equity on the market (or diversify it) and burden myself with a new giant mortgage on the new house, or slide that equity straight towards the new house and have a similar low mortgage principal to the previous house but at 6%. I chose the latter.
Not saying that my choice was the correct one from a strictly numbers standpoint. It was a difficult decision to make. But I do not regret it, and would likely do it again.