Quote:
Originally Posted by Sliver
This is the internet. I thought we were just supposed to make a series of assumptions that aligned best with the point we felt like making at that particular moment.
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Yeah and end up in a topic so far away from the original topic we don't know what the original thing we were arguing is.
Quote:
Originally Posted by you&me
Wait... We don't have all of the details, but there are some pretty safe assumptions that can be extrapolated depending on the specific case.
Like if you have a spare $25k sitting around and can put it in a GIC at 6%, or pay down your 3% mortgage by $25k, the interest earned in the GIC will be greater than the interest saved by the reduction in the mortgage principle (disregarding taxes, etc).
To argue otherwise would demonstrate a poor comprehension of reading math. 
That all said, the peace of mind on having less / no mortgage is priceless.
Edit - opendoor beat me to it. |
Because it's missing a few assumptions that factor in.
In theory it's the same with investing slightly ahead, but only if people follow that theory and pay down immediately after 3 years. The reality is that with cash on hand, a portion gets used because it is available rather than turn into a mortgage payment. Look at 1000 cases today and see the end results and I bet those who didn't lump sum are more behind to their peers vs that theory.
Your theory isn't wrong. But reality is that someone might take a portion and spend it on other stuff than the actual mortgage instead. Over 3 years you make $3-4K. Cool. You won't be tempted to use half on a TV? Then you're behind. Do that another dozen to half a dozen times and compound the interest difference. That's about a year or two behind. Reinvest to keep ahead of the mortgage rate and rinse and repeat a few times without spending a penny?
It's like the rent vs own theory a few years ago. It was right, until this insanity happened. Now in hindsight, is it right or wrong? We don't know in foresight, but reality typically is that in that Calc, those people with those pay down habits gets it paid down faster than those chasing a few extra percent on the market.
People investing the spread of GIC vs mortgage aren't going to do it short term. They'll keep reinvesting as a habit. This also isn't including the potential for more favorable rates and whatnot earlier or the fact the rates are still fluctuating.