There’s a huge discussion happening both on Lifehacker and Get Rich Slowly regarding the pros and cons of paying off a mortgage early. Contrary to my own assumptions, the numbers (assuming current interest rates around 6%) seem to strongly encourage investing your money instead of paying toward your mortgage’s principal.
On the one hand, you get a guaranteed outcome with paying down your mortgage. On the other, a conservative rate of return on an index fund should have no problem beating a 6% rate over the next 30 years. With the variability in people’s risk-comfortability, there is no right answer here, but it’s informative to hear the personal finance hackers weigh in with their opinions.
Are there any economists in the room that can explain how it’s currently cheaper to borrow money and invest it elsewhere rather than to pay off debts? Why would a mortgage company ever lend money in this scenario?