Is paying off your mortgage early actually a bad move?

I was listening to a finance podcast last week and the host said if your mortgage rate is under 4%, you're better off investing extra cash instead of paying it down. Said something about opportunity cost and missing out on market gains. I've been throwing an extra $300 a month at my principal for years thinking I was being smart. But now I'm second guessing - isn't having that debt gone worth the peace of mind? Anyone run the numbers on this and pick a side?

2 comments

2 Comments

chen.james22d ago

I locked in at 2.8% back in 2020. Ran the numbers myself. $400 extra a month for 15 years vs same money in index funds. Even with a conservative 6% return you come out way ahead investing. I stopped paying extra last year. Hard to beat that cheap money when the market averages 10% plus. Peace of mind is real though, I get it.

allen.amy22d ago

Did you factor in taxes on those index fund gains though? Capital gains tax can eat a decent chunk of that return difference.