Originally Posted by FangsF15

Uhh, covid absolutely counts. It may not compare in severity or duration of the 2000's, but it absolutely counts.

The point in rate arbitrage is NOT to spend the savings, or have more disposable income every month. It's to better allocate the savings. One examlpe is putting the difference after refinancing a mortgage into a High Yield Savings (instead of continuing to put it on priciple). In the meantime, you have a large savings account you can draw from to make your mortgage payment if you go to zero income (furlough), or to "borrow from yourself" instead of a bank for a smaller purchase, or simply have a larger emergency nest egg. For me, I went from 3.75% to 2.25%, and saved about $300/month. I put that difference into a high yield savings account at ~4.5% (variable), and 'make' an additional ~2% on that money.

If you amortize that out over the 20 years left on my mortgage, i could either pay the mortgage off 2 years earlier (yuck), OR do the above and at the end have ~$115,000 in an account. Use that to payoff the last ~$65,000 mortgage balance (still 2 years early), but have about $50,000 surplus in my pocket. And the vast majority of that time, I've had the safety net of a very large savings account. Frankly, it's such a no brainer, I don't konw why anyone would consider doing it any other way. And it's virtually hands-free.

Originally Posted by notEnuf

i value the large annual reductions in my mortgage principal. It’s motivation to know my only debt will be gone and Delta will be optional. What are the terms, benchmark and adjustment period for your variable rate? Some of these high yield savings accounts have terms that can kill your returns and if you are paying interest somewhere else to get the rate and make money the cost of the money can make it a balancing act requiring regular attention. I guess a security blanket is fine if your 30 year mortgage is paid in 15 years. I am happy with my inefficiency. Or rather not perfect efficiency.

Originally Posted by FangsF15

That's fine if you want to hit the 'easy' button. Just trying to ensure folks understand the difference that can be had by going about it a (very) slightly different way, and end up with $50k more at the end (plus the liquidity in the meantime in an emergency). There is literally no downside I can think of to this simple path.

Originally Posted by Verdell

I think the downside and/or lack of simplicity, for many people, is the discipline required. It definitely can be "hard" to stare at a dump truck full of money sitting at savings account rates and not want to: invest it in something that might make more, or spend it on a vacation or home improvement or toy. Displine to keep an emergency savings account is one thing, but to have another pile of discretionary cash ticking away at savings account rates can be.... difficult. Versus just paying off debt and saying "see you again soon!" to that money once the debt is paid.

Originally Posted by FangsF15

I will simply say this. These days, nearly every bank allows you to set up 'automatic' transfers. I have at least 10 different no-fee checking/savings accounts at 4 different banks (granted, several are for my wife's S-Corporation). It's pretty easy to 'set and forget'. but i get what you are saying about having the discipline to let it grow, if thats an issue for some folks.

Originally Posted by Verdell

All valid and reasonable. I guess my point is that sometimes lack of liquidity can be helpful. If cash is harder to access, it's harder to spend haphazardly. I'm certainly not attempting to argue against mathematically correct and/or disciplined approaches. I would say that taming the impulse of spending by immediately directing discretionary cash to pay down debt can be, and often is, helpful.

Originally Posted by Verdell

All valid and reasonable. I guess my point is that sometimes lack of liquidity can be helpful. If cash is harder to access, it's harder to spend haphazardly. I'm certainly not attempting to argue against mathematically correct and/or disciplined approaches. I would say that taming the impulse of spending by immediately directing discretionary cash to pay down debt can be, and often is, helpful.

Originally Posted by Trip7

Stop getting emotional and trying to make it personal. It's Simple math. Money in a Money Market or Savings account yielding 3%+ is better than paying off a long term 0% loan

Originally Posted by 170Till5

3% yield in a savings account? What about after taxes? It’s a terrible return on money

Originally Posted by Trip7

After tax returns on a 3-4% high yield savings account is still better than the 0% return of paying a 0% long term debt back years in advance and the negative returns when considering the time value of money along with inflationary impact. It's simple math. But if it makes an individual feel better to pay it off now to resist the urge of buying a Corvette or some other high cost purchase have at it. There is a reason Dave Ramsey is popular.