Theoretical Question: What % rate would your mortgage need to be to pay more aggressively

Around 5%

Yeh if rates were higher so would be my returns on savings and investments. That's a tough question to answer for me. Giving up money that can be earning is the kicker.

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should easily be able to outperform 6% in this market

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“Easily?”

6% is a decent return.

“The historical average yearly return of the S&P 500 is 9.352% over the last 150 years, as of the end of July 2024. This assumes dividends are reinvested. Adjusted for inflation, the 150-year average stock market return (including dividends) is 6.991%.”

Probably somewhere in the 10% range. If you’re starting with a mortgage there buying points to get the rate down may make sense.

My first mortgage was 17%, paid 4 points (then paying a point was 1% rate deduction) to get it to 13. Paid it off in 7 or 8 years as I recall. Aggressively paid over the payment every month.

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“The historical average yearly return of the S&P 500 is 9.352% over the last 150 years, as of the end of July 2024. This assumes dividends are reinvested. Adjusted for inflation, the 150-year average stock market return (including dividends) is 6.991%.”

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The S&P 500 has only been around since the 1950s so not sure where "150 years" is coming from. The average return of it is also a little bit above that 9.35%. Around 10.6% through last month with DRIP.

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It would have to be pretty damn high. My portfolio is up like 32% this year. Would be pissed if I had put that towards my 6.125% mortgage instead.

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How much would it have needed to be in 2022, then? I agree that I prefer to have money in investments, but not everyone wants that level of risk. It has been easy to make money since 2009 in the stock market thanks to massive government spending (and really going back to the early ‘90s). I do not see a reversion to the mean as I think the annual overall market averages are going to be much higher than 10% over the next 30 years (likely 15% or higher) because both parties are hemorrhaging money.

Any interest rate that is above what can be guaranteed return (bonds, savings accounts) then it is reasonable to pay down early. There are plenty of people whose peace of mind in owning a home is more valuable than investment returns. For those people, peace of mind is worth more than financial gains, so paying early is worth more than investment returns.

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My portfolio is up like 32% this year. Would be pissed if I had put that towards my 6.125% mortgage instead.

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Same. Totality of all accounts is sitting YoY at 30%. Stock only account which would be most impacted paying off mortgage is sitting at 37%.

Mortgage is the last debt I would focus on. If it is your only debt, you are not going be over 10% interest on mortgage, so invest.

No one is reliably getting 30% yearly, but your wealth accumulation is going to be severely stunted if you're not invested in those 30% years.


Remember, it's much more important to be IN on the green days than it is to be OUT on the red days.

My mortgage is at 2.875% so doing the minimum there but my HELOC follows prime so that is sitting at 8.25% currently I think. I moved my wife and I's roth IRA contributions and anything else I could muster and put it towards our HELOC every month at least until it comes down to 6% ish.

I agree with that, but isn’t that why the average annual gain is somewhere in the sub-8% realm? Without what you’re referring to, the average is probably 3-5%.

So if you can’t predict the 30% years, what’s the assumption? It’s gotta be sub-8%. If you can spot the 30% years…

Fwiw, I’m paying the min on my mortgage and don’t often agree with the early payoff strategy.