Wow.
I was the 15th vote, and the first to say steady as she goes? We're now at 14 finish and 1 steady?
I voted the way I did because with rates that low, I'd be investing any surplus money you have, and paying the minimum as long as possible.
To back that up: I practice what I preach. I just dropped to under $1000 left of student loans, and I have over six figures in the bank. It would take less than 1% of my cash to pay off my loan. NO THANKS. I will mourn when my student loans are paid off, no more super cheap money.
Obviously it depends on your situation, of course, and it is a more aggressive approach, better obviously if you're young and in a stable job situation, but I say invest over paying off cheap money! Guess I'm the only one though. :)
Rates that low? 5%
Is 5% really considered low? I ask because a) i value your opinion Spy and b) i have some at 4.75% and wasn't sure because it seemed to be in some sort of grey area.
Thanks!!
It depends on your opportunity cost, risk tolerance, and view of investing.
Historically, yes, it's quite low.
Whether or not you can beat that going forward remains to be seen, but it's a great inflation hedge - when rates go up, and prices shoot up, and your payment is at sub-5%, it'll be a nice feeling.
For some people though it's not about the math or optimal solution, but the emotions and feelings, and I can understand that.
I don't want to be debt free, ever, because that means I'm being inefficient - in the same way I don't want to own a giant SUV.
But plenty of people drive them based on emotion, and I'm okay with that (the sub 4%s though I think are crazy - if you're planning to ER and have a 3-4% withdrawal rate, but you're paying off a sub 4% loan, you are automatically saying your ER will fail - if you're paying it off, you're saying that you can't beat that rate with your investments going forward over the next 30 years, and if that is the case, you're saying you can't ER -- I think anyone who can get sub 4% money right now or has it should keep it as long as possible, especially if they're ERing.).
YMMV, obviously, and there's lots of reading on the forums on both sides of the "pay off mortgage or invest" debate if you do a search. :)