Did you adjust for inflation? Even at today's inflation rates, the dollars you pay in 30 years will be worth considerably less than the dollars you pay today. There's also an opportunity cost issue. Paying off your mortgage means not putting the money somewhere else.

> you're really just throwing away money.

No... you're paying for access to a resource that you don't have yourself. There's more utility in that than in literally throwing the money in the garbage.

I invested with steady 12-14% returns for 10 years and then watched it all get wiped out. The interest rate on paying of debt doesn't change. Granted, at current rates it's a lot tougher to make the argument for mortgage interest vs other types of debt.

Nobody ever shows a compound interest chart with anything other than a steady interest rate (aka - 30 years of 10% return = millionaire!). A single negative or downturn can have a pretty dramatic effect on those projections. If you look at those same projection charts and take the amount you'd look to invest over the first 10 years, but put into into debt payment instead of investing so that you get everything paid off, then take that same amount you would have been investing, start investing it plus the money that you're no longer paying in monthly expenses then you'll find the end of the 30 year period to be an almost identical result. The only difference is that after 10 years you've eliminated virtually any risk of personal bankruptcy.

If you can find something with a guaranteed long term return higher than the mortgage interest then it's another ballgame, but those are pretty hard to come by. Right now dividend investing seems to be the closest approach that generally lets you ignore the actual interest rates over time and instead focus on building cash flow.

But this is one of those topics that is part math, part point of view and part personal comfort level. This was just my perspective.

There was a point a few years ago where liquidating the investments could pay off the mortgage. To me it seems that you can get some of the benefits of the emotional release of being debt free if you have the capability to liquidate and clear debt.

While many people will make the argument that instead I should have paid the minimums and had more money invested with the net effect of reaching the liquidate/pay off point, I agree with the reasoning behind your argument: market volatility will not wipe out debt that has been cleared.

Exactly. NYTimes had an interesting visualization a few years ago that tracked the S&P 500 to show real-world results. It really shows the effect that doldrum years can have on returns:

http://www.nytimes.com/interactive/2011/01/02/business/20110...

I'm guessing you mean that all your gains got wiped out, not that your investments all went to zero.

On the other hand, a lot of people spent years paying on a mortgage only to get foreclosed on and lose everything including their principal. ie, that investment went to zero, or maybe even negative.

There's a lot to be said for paying down your mortgage, but remember that until you've completely paid off the mortgage all of your equity is at risk.

Except the money you spend on your mortgage is year 1 is worth a lot more than the money you spend on it in year 30. Especially with rates where they've been the past several years (our mortgage is 3.25%), cash flow is really the only upside to paying off a mortgage decades early.

In my limited experience, the freedom of not having a mortgage and a car loan, or any other type of debt, far outweighs the benefits of just cash flow. We now have a sense of freedom we didn't have Before. I think it is going to be very individual how one reacts to it, but for us having a minimal mortgage or none has made a big difference for us. Taking risks, having run startups for the last 20 years, this was a major contribution to being able to do this.

I am not saying debt isn't a fundamental part of policy, but in a place like Sweden actually not having more debt than you can handle is possible. http://www.scb.se/sv_/Hitta-statistik/Artiklar/Bostadslanen-...

So it is hard to say exactly who took on that debt, but someone probably did.

For more on how debt creates money, read up on http://en.wikipedia.org/wiki/Fractional-reserve_banking. And the person you replied to is exactly right - our entire economic system only works right if there is a lot of debt to go with it.

Even Mark Zuckerberg has a mortgage...

General rule of thumb when deciding between eliminating debt or investing is to compare if the debt interest is greater than investment interest (investment rate of return).

If (debt.interest > investment.interest ), pay off debt first. Else, invest.

I disagree with this tremendously. With your strategy, essentially what you are doing is buying stocks on margin. This magnifies your profits if things goes your way and magnifies your losses if things go against you.

Think about it this way - Interactive Brokers is an online brokerage with extremely low margin rates which are often half of current mortgage rates (see https://www.interactivebrokers.com/en/index.php?f=interest&p...). Using your logic, the right thing to do is to leverage yourself to the hilt for every penny Interactive Brokers will loan you at 1.63% or less and cross your fingers you make the right investment choices otherwise you're bankrupt.

Buying investments on margin, no matter how it is done, is extremely risky. You might understand those risks and have a high enough risk tolerance but please don't pretend investing on margin is a general rule everyone should follow.

It's the same thing. If it makes sense to keep $300,000 in debt to keep a $300,000 investment then it makes sense to go into $300,000 debt to make a $300,000 investment.

Whether that debt is a mortgage on a primary residence for a tax-equivalent-rate of 2.75% or margin interest for a tax-equivalent-rate of 1.63% makes little difference. This is what people who keep a high mortgage and invest the proceeds of that mortgage don't get. They are doing the equivalent of investing on margin which is extremely high risk. They could lose a large portion (or even all) of their investment and still be left with the debt.

That's not what I meant, definitely wouldn't borrow to invest so much as decide to invest (if I came into a new chunk of money) money on hand.

I'm not sure where the assumption is that I meant to invest on margin - it feels like I'm missing something.

When you do margin trading you take on debt to allow you to buy more stock. In your case, you aren't actually "taking on" debt technically, but you choose not to pay it off so that you can buy more stock.

After all, the scenarios break down to debt + more stocks or no debt + less stocks.

Obviously there are some differences, but I hope that explanation of the analogy made sense. The point is, by investing money instead of using it to pay off debt you are increasing your risk and reward whereas when you pay off debt you decrease it.

You make the world a better place.