Hi everyone,

I'm new to the MMM community. I've read quite a few of the blog articles and think the general philosphy is great. I have a decision coming up and am wondering what everyone's take on my thinking is.

I am considering making a large principal payment on my mortgage to eliminate PMI. I'm assuming I'll stay in my house for 8 years. This would require making a $36k payment next month. I would save $137/month in PMI for the next 86 months (when my mortgage would naturally hit 80% LTV assuming no appreciation). I would also save ~$8k in interest over that time period after backing out my tax deduction. Thus, my total savings would be (137*86)+8000 = $19,782.

The alternative is to put the $36k in a brokerage account and buy index funds (I'm set on emergency fund and tax advantaged accounts). Assuming that grows at a 6.8% rate, I will have $24,935 in gains after 8 years. Subtracting 20% capital gains tax leaves me with $19,948 - about the same as the other scenario. The break-even return in these circumstances seems to be around a 6.8-7% return.

First question - is my math correct? Are there any unreasonable assumptions here?

Second question - it seems obvious to me to make the payment and take the guaranteed ~7% return rather than attempt to beat that return by investing. I understand that historically equities have performed slightly higher than this, but the marginal difference is far from guaranteed. A friend is trying to convince me I can beat that in the market, but I'm skeptical. I know the right answer depends partially on subjective factors (like risk-tolerance), but I thought I'd ask - what would you do?

I would appreciate any help fellow mustachians could offer!