I've been a proponent of early-payoff of a mortgage because of the interest savings. I still am, for the most part.
If you have a lot of resources and can do really well with your money, then it might pay not to pay off your mortgage quickly. It might just be a great deal to make the minimum payment for the entire 30 years (or until you move).
Gary North, author of the free twice-weekly newsletter Reality Check, probably will hold on to his 30-year mortgage. It's valuable, he says, because inflation will make the dollars you pay later less valuable than the ones you pay today. Thirty-year money at recent rates can be a great asset for the mortgage holder.
So I did a quick calculation. For a 30-year $100k fixed 5.75% mortgage, the P&I payment is $583.57. The sum of the payments over the life of the mortgage is is a little over $210k.
But these dollars will not be worth the same under inflation. If we assume a 3% annual rate of inflation, this is 0.25% per month, meaning that next month's payment will be worth 99.75% of this month's payment, in today's dollars. Make sense? So if we start with $583.57 this month, next month's payment will be $582.11 in today's dollars, and the month after that will be $580.66 in today's dollars. The last payment will be only $237.59 in today's dollars.
The sum of these constant-dollar payments is under $139k. This translates to an inflation-adjusted rate of return of only about 2.3%!
This, by the way, is probably why the federal government likes inflation so much. $8 trillion ain't what it used to be!
Interesting point of view..
Cant really say I agree, but.
Guess we cant agree on everything, right?
If inflation is 3% and your mortgage rate is 5.75%, you're still saving 2.75% tax free on your mortgage, correct? That's if you factor in inflation. Be sure to calculate this factor in any other investment you may have chosen.
5.75% is a great rate by the way. If yours is larger then you would be saving more with an early payoff.
Also note on many other investments that you may choose,other than paying off your mortgage early, you must pay taxes on the gains. When paying off your mortgage early you are saving money on interest and this is not taxable.
I also like the fact that the interest rate (5.75% here) is guaranteed unlike any investments in the stock market.
That's my opinion. A riskier investor will probably choose to invest their money somewhere else.
forex trading is about descipline, money management and risk management. One need not be an economist to predict the forex market. One need not keep watching market through out the day (and night) to trade in forex market.
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If we are talking about an investment property (commercial or residential) then why not? You will be able to estimate you fixed expenses for 30 years. As inflation rises, so will your rents, but your mortgage payment stays the same. Assuming you put in upgrades every 5 years to maintain the value of the investment, how could you go wrong?
The value of real estate over the long term is always a significant increase.