if I pay off my mortgage - $450 is my principle + interest so my total savings per year would be $5,400
Unless the money to pay it off was a gift you are not saving money because you spent it. The money to pay it off comes from somewhere. You won't have that 85k in liquidity anymore. It will be in your house.
if I don't pay off my mortgage the expected return of 85,000 x .07 = $5,950
Right so you are able to make money off of having money. Once you have you used it to pay off your mortgage you can't use your 85k to make money for you anymore (compounding, interest etc)
What I was saying before is that if your wages grow over time do to inflation and or raises, the mortgage will comparatively become easier to pay. In ten years the 5400 you spend a year will be less adjusted for inflation. That's why it's important to know how many years you have left.
You also haven't said what you will do with the money you have from wages going forward. For some people who would otherwise blow all the money on tvs or whatever, putting all your money in your house can be a good idea. But you wouldn't do that right? :-)