For years I was all about paying my house off early. I wanted that debt gone. I understand why people feel that way.

Then 2021 and the next 5 years happened. I got a 2.25% mortgage, and I became way more senior. In a nod to Ramsey, it’s a 15 year mortgage,

The mortgage, as a percent of my take home, is incredible low. I’m able to save $4000 a month in a taxable account, invested in a mix of assets including stock ETFs.

My taxable account has ballooned over the last few years to the point where I have enough to pay off my house. A good year in the market covers 2 years of mortgage expenses.

My plan absolutely has more risk, as the market could take a 50% dump and I get furloughed. However, overtime, if one is an aggressive saver, the risk profile becomes less and less as the delta (mortgage vs taxable balance) grows.

In my opinion, the risk profile is most critical when people pre-pay their mortgage before having enough to pay their balance off. Using the poster above who is paying $10,000 extra a month, that’s money that’s gone, or at least difficult to get back. In a downturn, I’d rather have that money to figure life out. I’d at least wait until you can pay the mortgage off in one payment.

 

This is a great post. I think what people object to most is those who claim that paying off the loan early is what everyone should do and they rationalize their advice by saying it makes you more money. Certainly paying off your mortgage is A strategy but it's absolutely not the only responsible one

 

My home loan is at 2.1% which is less than inflation.. The bank looses money every year on my mortgage. I do split my payments into bi weekly vs a monthly payment. Still the same amount overall but it saves me on compounding which over the life of my mortgage is about $50k

 

Ask a former Spirit pilot if they wish they had a paid off mortgage.

 

There’s also the intrinsic value of living life to the fullest now vs. the mindset of “when I’m 60 I’ll do XYZ.” “Fullest” does not mean financially stupid, but spending money to enjoy life and make memories can be a lot more satisfying and “worth it” than dumping tons of extra money into a low rate mortgage.

 

If they had the ability to pay it off using taxable investments,.they still have the ability to pay it off. If they had the ability to pay off their mortgage using additional monthly payments but didn't because they chose to invest that money in the market, they still can use that money to pay off their mortgage or make monthly payments until they inevitably get a pilot job again....AND they would still have more money than they otherwise would have if they'd just paid down principle

At our income levels, there is zero excuse to not have 6-12 months of liquidity for emergencies, especially if you're at a place like Spirit that has been shrinking and furloughing over the last year

 

You don’t pay taxes on capital gains unless you sell the stock.

Borrow cash against them tax free (loan proceeds are not considered taxable income), then when you die transfer them to your heir which resets the cost basis to market value. This allows them to sell the stocks with little to no capital gains tax liability.

 

Ask if they would rather have $50,000 liquid or a $50,000 reduction on a $200,000 mortgage. It's better to have the cash than lower principle when your monthly payment remains the same. How you achieve a paid off mortgage matters.

If you have the cash to pay it off, then a paid off mortgage is a choice. Paying down principle is tying up money in an illiquid 3-6% bond.

 

Also a great point! Too many don't get the option to do it later.



Now we're going places. Another option, rather than sell a stock to give to charity, donate an appreciated stock to that charity. Less tax burden and more money to your charity.

 

I'm genuinely curious... if you could take out a 6% personal loan for $500k to use for investing on the stock market, would you do it? Would you consider this a financially sound strategy?

Because while it's not exactly the same as a mortgage, it is very similar in most of the ways that matter.