I have this "great problem". I managed to save around 160k towards my 290k mortgage last year. I have a 2.8 interest rate. Then I decided to invest the 160k instead. So I bought around 90k in s&p, qqq, some mag7 individual stocks and also bought around 30k SCHD, 20k QQQI, 10K SPYI, 10K JEPI. The portafolio has grown to 230k by now and is paying me around $750 in monthly dividends. My monthly mortgage payment is 2k. I will continue to contribute to this portafolio $750 monthly (not sure what holdings) plus all dividends will be DRIP. According to dividend tracker app my investment should generate 24k yearly dividends in 8 years if I DRIP everything. I want to retire in 8 years which fits perfectly to reach retirement with a way to cover my mortgage plus the portafolio will grow to around 490k. My wife would like to payoff the mortgage ASAP but I have a different way of thinking. She says use the entire portafolio towards the mortgage as well as our savings and we can be "debt free tomorrow" then we can save more and build up another portafolio but we'll be debt free. I love the idea of being debt free but the investing numbers don't let me do it. I lean more towards building up a machine that generated enough monthly income to pay off the monthly mortgage plus I keep the portafolio and adds liquidity. By the way, we are not fighting and understand each others point, but each of us lean more towards opposing directions. What would you do?
Paying off mortgage or investing
byu/Far_Reply5660 ininvesting
Posted by Far_Reply5660
16 Comments
Invest.
At 2.8%, it makes no sense to pay it off.
You could buy treasury bonds and earn more interest.
Never pay off your mortgage if your rate is 2.8%. Always invest that money. One you can VOO and chill and pretty much gurenteed that you will do better than 2.8%. Two the value of that loan is going to be inflated down significantly faster. Basic rule is $10 today is worth more than $10 tomorrow even at the fed target rate, which we won’t likely see for another year or more…
Paying off your mortgage with that money might “feel good” because you are getting rid of debt, but it is not the smartest decision. You can still write off your mortgage interest against your taxes, effectively lowering your interest rate even more, and your average return in the market will significantly outweigh the benefit of paying off that mortgage. You will retire earlier and with more money this way.
> 2.8 interest rate
Invest it. You’re literally getting that money for free. You can borrow it, put it into something like a CD (USA) or GIC (Canada) for guaranteed returns exceeding the borrow rate.
Being said – I’d take on a little risk like you have. It makes literally 0 sense to pay off your mortgage, try to delay payments at that rate for as long as possible.
interest rate is super low, i would continue to invest. If when interest rate rises above 5% than probably best to pay down the mortgage. Until than keep investing.
But if your the type of person get stressed out if the market decides to turn, than pay off your mortgage. Mental health > any profit.
I feel like from a mathematical view, it’s clearly investing. From the happy wife happy life perspective, maybe it’s best if you work out a middle ground where you can offset some risk and pay down some of the mortgage and invest the difference.
At 2.8% its not really worth paying it off. I mean depending on your tax bracket you could simply buy 1 year treasuries and get 3.8% pay taxes and still come out ahead. Or depending on the state get tax free muni bonds that usually yield around 3.1 and still come out ahead over the 2.8% mortgage
To me it gets more complicated when the debt is like 5%. If its 2.8% the financial answer is simple , don’t pay it off. You can simply invest in risk free assets and earn a higher rate vs the mortgage rate
keep the portfolio. at 2.8% the debt is cheap and you’re beating it. do a partial paydown + recast to cut the payment and keep both peace of mind and growth
Cancel the DRIP and pay the mortgage with the dividends. Then you do not worry the monthly payment, which is probably your wife’s concern. Meet in the middle, you will leave some on the table, but she can sleep better.
Invest!!!!!!!!!
You’re not wrong, mathematically, investing wins here. A 2.8% mortgage is cheap debt, and your portfolio is already proving it can outgrow that. Killing the mortgage gives certainty, but it also kills your compounding machine.
What I’d do is a middle ground: keep the portfolio working, maybe allocate a portion to reduce the mortgage for peace of mind, but don’t wipe it out completely. You’ve built something that’s generating income and liquidity, that’s valuable.
Also worth considering adding a slice of Bitcoin into the mix. Not to replace what you’re doing, but as a high-upside asset alongside your equities. Over an 8–20 year horizon, even a small allocation can materially move the needle if it continues its historical growth trajectory. Bitcoin has the highest cagr compare to all other assets out there.
End of the day it’s math vs psychology, you’re playing the math correctly, your wife is valuing certainty. The best answer is usually somewhere in between.
[Bitcoin Bear Market DCA Playbook](https://youtu.be/JXvr49ECTuo)
At such a low interest rate I wouldn’t pay it off unless it’s something that causes you serious anxiety or something.
Do not pay off a 2.8% mortgage. You could put it in a HYCA or CDs and still earn more in interest than what you’d be paying your lender. Paying off this mortgage would be crazy, but I think you already know that and just need to convince your wife.
2.8% is below inflation. Not even a consideration at this time. DRIP is not always great. I like to pick where to reinvest my dividends. Your portfolio seems fairly well balanced. Especially if you have a tax deferred account, consider adding a higher dividend generator like PDI (noting that lowest share prices are usually towards months end since it pays monthly dividend @15%.
At 2.8% invest. Always invest. Never mind that you will inevitably move during your career life or during retirement. Invest.