I completely get the arguments for investing money instead of paying down a mortgage.
Personally, I agree with that logic in some cases, but not all cases. I don't really want to re-hash all of those arguments here.
In my case, I do plan to invest heavily, and we are carrying more of a mortgage than we have to. However, I do want to pay it down before quitting a job in the 5-10 year time-frame.
Here's the specific problem I'm trying to optimize. In addition to the below, I would put half of our annual bonus towards principal pay-down while investing the other half.
Option #1: $530K mortgage, 7/1 ARM at 3.875%. Monthly minimum P&I~ $2,500
Option #2: $530K mortgage, 30yr fixed at 4.5%. Monthly minimum P&I ~ $2,700
Option #3: $530K mortgage, 7/1 ARM at 3.875%. Make $2,700 monthly payment (similar to the 30yr fixed) to be in a better position when interest rates reset.
Considerations: The 3.875% rate has a discount applied. When rates reset, they will be at LIBOR + 2.25%. It's hard to imagine rates not going up based on this. However, taking an extra $200/month and either investing it (option #1) or paying down principal (option 3) seems like it would leave us in a much better position in seven years.
I hope to build a spreadsheet for this over the weekend, but dealing with movers and utilities will probably be the priority.