Also, mortage interest only matters if you itemize your deductions. Since the Tax Cuts And Jobs Act of 2017, roughly 90% of tax filers have claimed the standard deduction. As high income earners we are probably more likely to have enough deductions to fall into the 10% that itemize, but as you said above if you do itemize you get the exact same tax savings by donating money as you do with paying mortgage interest.

 

This is all just about your mindset wrt to security/money/liquidity overall. At sub-3% mortgage, there is no way I'm paying a dime more than required on my mortgage, especially when I can use those funds to make 5% relatively safely or use it for a RE purchase that helps pay off that mortgage. I could have just paid off my first house early, but instead I used that to purchase a few more RE investments. Now they all pay for themselves AND the mortgage on my house...before I even look at the tax savings.

As another example, I'm in the process of buying a new vehicle. When negotiations started, they were offereing 6-9% as their best offer. With those rates, I'd just pay cash for the car and be done with it. After negotiations, I have them down to 1.9%. At that rate, I'd gladly finance because I'll only pay $2k in interest over the life of the loan. In the same timespan, I can conservatively make 2.5x to 3x that (after taxes), in fairly safe accounts. To keep from spending it, simply put in another account that isn't as easy to access as a checking account. To me, it just seems illogical to not do it that way. I'll make more money, I'll have cash if I need it for a big expense OR I could just pay it off at any time if things change. If I wanted to get a little more risky, I could borrow against that money in my account with something like an SBL. However, more power to those who just want to be done with it. I completely understand why some want the security blanket of having it paid off or have zero discipline and can't keep money in an account.

 

You got hired in 2014 and have enjoyed nothing but pay raises, upward movement and improved contracts. You have never seen a big downturn(Covid does'nt count), 30-45% paycuts + downgrades, etc. Those who had little or no debt during those times were much happier and navigated those times better. The only thing that changed in their lives were the ability to save less and maybe some discretionary spending. We had "money experts" before the dark times too claiming how smart they were to have lots of bills, homes, cars, boats, etc "because money is cheap". They still had to pay those loans at the end of the day..

 

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.

 

Let us know how it feels in 18 years 😉

Once again, we get the math. It makes all the sense in the world. You, Gunfighter and Trip probably do have the discipline to execute flawlessly - GF’s autopilot plan sounds the most likely. Hard to see in this echo chamber but you guys are financial outliers.

Debt is a tool. If you need/want to use it, use it. As to why, re-read NERD’s post and combine that with 1) having seen plenty of industry black swans all the way back to EAL going under and 2) just don’t need to

You aren’t wrong. Best of luck to all.

 

Equity snowball FTW
​​​

 

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

 

Is this sarcasm? I didn’t see any emotion in the above post by NERD.

 

There is a human component. Most people when they get excess money don’t invest the excess. They spend it.

 

Well if someone realizes they can't resist the urge to spend money collecting interest in a separate account then I agree the Dave Ramsey approach to pay everything off and avoid debt is appropriate.