Quote:
Originally Posted by blankall
Cash flow is good. But if you keep the investments, when your mortgage is eventually paid off, you get the cash flow, plus the investment, which could be in the hundreds of thousands.
You could also hedge your bets, and keep the investment to the point the dividends pay for the mortgage, and use the dividends to pay the remaining mortgage.
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A hundred thousand dollar lump sum could save you around 4-6 years of amortization. At 4%, that's around $16-24K interest (uncompounded for simplicity) over that 4-6 years. The thing is, I could marginally beat the mortgage rate using the $100K up front, but I need to factor in having a mortgage for 5-6 years less.
If it's $100K, 6% average ROR, then I have an extra $8-12K ($2K per year x 4-6 years), which is less than the interest savings on a shorter amortization.
$100K with average rate of return of 10%, then I have $40-60K after 4-6 years, or $24-36K to pay down the mortgage, so slightly ahead of the interest savings for 4-6 paying off early. But keep in mind that rate of returns over 10% weren't really normal until the pandemic. getting 10% rate of return is a weird new normal. I assume it's here to stay, but I honestly don't know. Otherwise, I'd remortgage and dump it into the stock market and be mortgage free even faster (but that likely starts its own vicious cycle).
Could I throw a ton into Southbow for an 8% dividend yield and reasonably expect enough gain in stock price to be above 10% rate of return over a period of time like 3-5 years? Yeah, and it's a simple plus relatively low risk (but not risk free) and effortless concept. Which is why I agonized on a decision to let my money ride or cash out and lump sum pay down the mortgage. Paying down the mortgage gives up opportunity cost, but is effortless. Investing allows you to keep opportunity cost, but slightly more effort is required to keep it up.
The simplified cashflow flexibility of mortgage free earlier vs juggling cash flow movements into multiple paths to accumulate wealth on paper would immediately eliminate some stresses. I want that. That has value to me, that's a path I'm pursuing. The world is so complex, one less thing would be great.
I'm also comparing this to what I've done investments wise over the last 10-15 years. I think I could make good bets and likely could beat 10% relatively easily. But I don't know how much longer I really want to have to put in effort to manage so many things simultaneously. Yeah, I know that some people might think it's kinda dumb, but oh well.