What is your threshold for making pre-payments to your mortgage?

[ChpBstrd]

The Pay Off Your Mortgage (POYM) versus Don't Pay Off Your Mortgage (DPOYM) debate has raged for years, but as of today (9/22/22) 30 year mortgage rates have risen to 6.3%. Forecasts say 30y loans will peak at 7.5%, but they could go even higher.
https://econforecasting.com/forecast-mort30y

Maybe holding a 3% mortgage was seen as a no-brainer, but what are your thoughts at over twice that interest rate? At what point would it make sense to plow money into mortgage payoff, instead of your investment AA? At what level is the risk-free return of mortgage payoff higher than what you'd expect from your AA?

Assume you only know as much about the future trajectory of inflation, stocks, bonds, or housing prices as you know today.

[dcheesi]

Besides the simple ROI math, there's also the question of liquidity.

If I sink all of my excess capital into pre-payments, and then I lose my job, then I have no liquid funds to keep paying mortgage until I find a new source of income. I could potentially lose the house, and all that equity that I'd built up via pre-payment.

Whereas if I'd invested the money in relatively liquid investments, I could draw down on those funds to tide me over.

So even if the ROI on the reduced interest starts to edge out that of the investments, there is still a potential safety advantage to the latter approach. I'm honestly not sure at what point the relative ROI would begin to outweigh such concerns; it's probably not a simple number, but rather whole host of confounding factors to be considered on a case-by-case basis.

[DadJokes]

I answered 7%, but it really depends on what kind of return I can reasonably expect from CDs, ibonds, and similar guaranteed vehicles.

[Villanelle]

Interesting question.  At about 7%, I would probably start to consider it.  Hard to say though, and since I have a fixed rate mortgage, it's likely an academic exercise only for me, unless and until I buy again with another mortgage.

[ATtiny85]

I pre-pay by rolling equity into down payment for next house, which happens every few years due to corporate relocation. It provides flexibility and decreases some risk as far as we are concerned. Such as when we have to move next year, we won't have to take on (much of) a mortgage at a rate that is likely going to be fairly high, and may stay there for the life of the loan.

[Gremlin]

Both never and always at the same time.

As an Australian, we don't have fixed 30 year home loans.  However, we do have a magical thing called an 'offset account'.  The offset account is a transaction account that is linked to a variable rate home loan.  Instead of paying interest on the loan balance, you pay interest on the difference between the loan balance and the offset account.

For example, if my current loan balance was $150k and my offset account was $50k, I would pay interest on an effective balance of $100k.

Because interest is payable with after tax money, this means is that for an individual with a home loan, the effective risk free rate becomes your home loan rate divided by (1 - your marginal tax rate).  Which means that it's almost always more effective to dump cash in your offset account until your balances match than to do anything else with your money.

So I'll never pay down my actual loan account, but I'll always pre-pay my mortgage via my offset.

[StarBright]

There is no "depends on your situation" option?

Mathematically it would be somewhere around 6-7% (but even that depends on investments? What about a world where ibonds are over 9% for an extended period> - but also that isn't likely).

My mortgage is like 3% but my current life situation has had me toying with paying early for several years. Cash flow is important to me.

[Paper Chaser]

I take a diversified approach regardless of the interest rate. I always prioritize tax advantaged accounts, but once those are maxed out, I put some towards the mortgage rather than going into a taxable account each month.

If there were no tax advantaged options, and the decision only came down to mortgage rate vs expected return, I think the guaranteed payoff that comes with a mortgage rate of 5% or so starts to get tempting.

[bacchi]

Both never and always at the same time.

As an Australian, we don't have fixed 30 year home loans.  However, we do have a magical thing called an 'offset account'.  The offset account is a transaction account that is linked to a variable rate home loan.  Instead of paying interest on the loan balance, you pay interest on the difference between the loan balance and the offset account.

For example, if my current loan balance was $150k and my offset account was $50k, I would pay interest on an effective balance of $100k.

Because interest is payable with after tax money, this means is that for an individual with a home loan, the effective risk free rate becomes your home loan rate divided by (1 - your marginal tax rate).  Which means that it's almost always more effective to dump cash in your offset account until your balances match than to do anything else with your money.

So I'll never pay down my actual loan account, but I'll always pre-pay my mortgage via my offset.

Is there interest paid on the offset account? And can the offset be withdrawn at any time?

[Laura33]

My brain is anchored at around 4% mortgage rates, probably because that was the first time I went "holy crap, that's cheap!" (my first mortgage was at around 8%, and even that was less than my parents paid and seems like a deal at the time).

We have a 15-yr at 2 7/8% that is timed to be paid off when DS graduates, so absolutely zero chance I'll be paying that off.*  But on an academic level, I'd probably need to see a 6-7% mortgage rate before I'd seriously focus on paying it off.  But part of the reason I'd even consider it at that low of a rate is because we're not that far out from retirement anymore, so we're at the stage where things like TIPs and bonds become a part of the portfolio.  And that means prepaying becomes a better deal at a lower mortgage rate than if we were still in the gung-ho accumulation phase.  If we were younger, I'd probably put the payoff over/under around 8-8.5%.

Put another way:  I see tremendous benefit in having a paid-off house by the time I retire.  But I see minimal benefit to having it paid off even one day before I retire.  So unless the interest rate is really pretty high, I'm not going to tie up my money by just having it sit in my house. 


*The 15-yr was in fact a prepayment compromise, as we could have gotten a 30-yr for somewhere around 4% then, but I liked the ridiculously low rate + the idea that the mortgage payoff coincided with our planned retirement date.

[Gremlin]

Both never and always at the same time.

As an Australian, we don't have fixed 30 year home loans.  However, we do have a magical thing called an 'offset account'.  The offset account is a transaction account that is linked to a variable rate home loan.  Instead of paying interest on the loan balance, you pay interest on the difference between the loan balance and the offset account.

For example, if my current loan balance was $150k and my offset account was $50k, I would pay interest on an effective balance of $100k.

Because interest is payable with after tax money, this means is that for an individual with a home loan, the effective risk free rate becomes your home loan rate divided by (1 - your marginal tax rate).  Which means that it's almost always more effective to dump cash in your offset account until your balances match than to do anything else with your money.

So I'll never pay down my actual loan account, but I'll always pre-pay my mortgage via my offset.

Is there interest paid on the offset account? And can the offset be withdrawn at any time?

Most offset accounts pay no interest.  Others will pay interest on the part of your balance in excess of the loan amount, but it’s negligible.  The benefit is in the interest you DON’T pay on your home loan.

The offset account is your money, you can withdraw it at any time for any reason. Unlike a loan redraw or refinance you don’t need to jump through the bank’s hoops to get access to that money. A maxed out offset account is great for FIRE’ees as it effectively gives you access to borrowings (should you need them) in your FIRE years, on terms assessed using income levels from during your working career.

[Fomerly known as something]

I’m not sure.  It’s a combination of more than just an interest rate for me.

[ChpBstrd]

I’m not sure.  It’s a combination of more than just an interest rate for me.

What are the other factors?

E-fund topped off?
Yield of competing investments?
Market trends?
% Equity?

[dcheesi]

Both never and always at the same time.

As an Australian, we don't have fixed 30 year home loans.  However, we do have a magical thing called an 'offset account'.  The offset account is a transaction account that is linked to a variable rate home loan.  Instead of paying interest on the loan balance, you pay interest on the difference between the loan balance and the offset account.

For example, if my current loan balance was $150k and my offset account was $50k, I would pay interest on an effective balance of $100k.

Because interest is payable with after tax money, this means is that for an individual with a home loan, the effective risk free rate becomes your home loan rate divided by (1 - your marginal tax rate).  Which means that it's almost always more effective to dump cash in your offset account until your balances match than to do anything else with your money.

So I'll never pay down my actual loan account, but I'll always pre-pay my mortgage via my offset.

Is there interest paid on the offset account? And can the offset be withdrawn at any time?

Most offset accounts pay no interest.  Others will pay interest on the part of your balance in excess of the loan amount, but it’s negligible.  The benefit is in the interest you DON’T pay on your home loan.

The offset account is your money, you can withdraw it at any time for any reason. Unlike a loan redraw or refinance you don’t need to jump through the bank’s hoops to get access to that money. A maxed out offset account is great for FIRE’ees as it effectively gives you access to borrowings (should you need them) in your FIRE years, on terms assessed using income levels from during your working career.

That's awesome! It completely eliminates the liquidity concerns I mentioned in my first comment.

[Fomerly known as something]

I’m not sure.  It’s a combination of more than just an interest rate for me.

What are the other factors?

E-fund topped off?
Yield of competing investments?
Market trends?
% Equity?

Yes plus.  How long until it would be paid off, affordability of the payment.  The opportunity cost of paying off the mortgage.  What else I could be doing with the money to make my life better.

Example, I just bought a place in April.  I’m lucky as I still have a decent rate at 3.875%.  But honestly the rate effects my price range more than anything.  My monthly housing budget includes PITI so if the interest is higher that just means the principle must be lower.  I had done the math when looking and was good up to 5%.  After 5% my target price would have dropped so that if/when I found a place it was in the budget that I had predetermined.  I could have bought outright.  But paying all cash would mean that my non tax advantaged investments would be about zero.  Those investments will cover what I need from FIRE until I can start taking out money from tax advantaged accounts at 59.5.

[Loren Ver]

I answered 7%, but it really depends on what kind of return I can reasonably expect from CDs, ibonds, and similar guaranteed vehicles.

I had a really hard time answering this, as it depends on what my returns are doing, though I also throw in my more variable work horse investment vehicles not just my guaranteed ones.  If I am making good money, I am in the pay forever no matter what club, if I am only getting 7% returns, slightly less than 7% would be my answer.  It would also depend on how much liquidity I had, if I am running bare bones, then NO WAY and I locking money into a house. 

Before I really understood how these things worked, I did pay off my high rate student loans (when they were variable and over 9%) and some lower rate student loans that were locked in.  Then I wised up to how life worked.  So I do have some data that may prove me wrong if this question went from academic to reality. 

Note- I am someone that has retired with both a mortgage and student loans so I do enjoy me some good leverage :).

Loren

[mistymoney]

there are a lot of considerations outside of the interest rate that I would consider.

for example, if my stache wasn't to a coast fire situation, I would not consider putting extra towards mortgage.

that said, I put 6 for the purposes of the survey.

[Gremlin]

Both never and always at the same time.

As an Australian, we don't have fixed 30 year home loans.  However, we do have a magical thing called an 'offset account'.  The offset account is a transaction account that is linked to a variable rate home loan.  Instead of paying interest on the loan balance, you pay interest on the difference between the loan balance and the offset account.

For example, if my current loan balance was $150k and my offset account was $50k, I would pay interest on an effective balance of $100k.

Because interest is payable with after tax money, this means is that for an individual with a home loan, the effective risk free rate becomes your home loan rate divided by (1 - your marginal tax rate).  Which means that it's almost always more effective to dump cash in your offset account until your balances match than to do anything else with your money.

So I'll never pay down my actual loan account, but I'll always pre-pay my mortgage via my offset.

Is there interest paid on the offset account? And can the offset be withdrawn at any time?

Most offset accounts pay no interest.  Others will pay interest on the part of your balance in excess of the loan amount, but it’s negligible.  The benefit is in the interest you DON’T pay on your home loan.

The offset account is your money, you can withdraw it at any time for any reason. Unlike a loan redraw or refinance you don’t need to jump through the bank’s hoops to get access to that money. A maxed out offset account is great for FIRE’ees as it effectively gives you access to borrowings (should you need them) in your FIRE years, on terms assessed using income levels from during your working career.

That's awesome! It completely eliminates the liquidity concerns I mentioned in my first comment.

It's funny.  I know a lot of Australians that bitch and moan about how we don't get the opportunity to fix loans for 30 years as you do in the US.  Yet if you're disciplined with your money, the offset account functionality means you can get well ahead pretty quickly here even with the risk of your variable interest rates spiking at short notice. 

Maxxing your offset ranks very high on the optimal investment order (https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333550/#msg1333550 for Australians and rightly so.  Not only is it a great investment, but it also pretty much eliminates any liquidity concerns forever.

[poetdereves]

I said 8%, but it varies based on where we are in life. DW and I have a new baby and have both considered what our work situation will look like through the next 5 years. There’s a high likelihood that one of us will take time off of full time work for at least a couple years until DS is in school. Most of our money is allocated in ways that will let us draw from investments or savings to cover living expenses if needed, so even with a mortgage rate 8% or higher (which we don’t have) I’d probably still dump it into something more accessible than the payoff of our mortgage. We bought in July 2022, so we are keenly aware of the chance that our house will drop at least a little in value over the next few years, so there’s not a high likelihood we could pull much equity out with a refinance if we wanted to access it.

On the flip side, if it was 8% and we were fine with both working full time for the next 10-15 years, I would probably be easily convinced to pay down the mortgage some since it’s really our only debt at this point. It wouldn’t matter as much if we couldn’t access it since both full time jobs combined bring in significantly more money than we spend.

[six-car-habit]

I put 4% for the poll , since that's close to the loan rate i'm currently paying.  I think it might have to be as low as 1% for me Not to pay extra.

 Am working on the " One extra principle payment a year will lower time paying the mortgage by approx 7 yrs [ on a 30 yr loan] "   rule of thumb.

  It's not going to beat the markets, i realize that. But i find it a usefull goal.

[Morning Glory]

Mathematically, it is the same to sell shares as to not buy them. At what interest rate would it be better in current market circumstances to sell stock at a loss to buy a house in cash, vs taking a mortgage with hope of either refinancing when rates eventually drop or paying off after stocks recover to previous high? (Presuming that it is still cheaper to buy than rent in either of those scenarios). Of course we don't know how fast stocks will recover or if we have reached a bottom but most times a rebound from a bear market is faster than the average rate of growth.

 I suppose it boils down to individual risk tolerance but I want to know if the interest rate at which you would pay off a mortgage early vs invest changes depending on whether stocks are "on sale" or not.

[Telecaster]

I suppose it boils down to individual risk tolerance but I want to know if the interest rate at which you would pay off a mortgage early vs invest changes depending on whether stocks are "on sale" or not.

Not really.   When you do the analysis the question is interest rate vs. expected rate of return over the the loan term.   For a new mortgage, the term is probably 30 years.  So over the length of time it doesn't really matter what the starting stock market valuation is.  There will be several bear and bull markets during that time frame.   If you have existing loan with say, seven years left, it is still hard to say.   Even if stocks are on sale, they still might not perform well over seven years.   Opposite is true as well. 

The hard question is at the top of this thread.  At what threshold does paying off your mortgage start making sense?   I've thought a lot about this question and never came to a firm conclusion.   I have a 3.5% and a 4.5% mortgage.  They are both firmly in the "never, ever." category.    At 7.5%, which is about what mortgages are running now, I'm not sure what I would do.   

[HPstache]

I suppose it boils down to individual risk tolerance but I want to know if the interest rate at which you would pay off a mortgage early vs invest changes depending on whether stocks are "on sale" or not.

Not really.   When you do the analysis the question is interest rate vs. expected rate of return over the the loan term.   For a new mortgage, the term is probably 30 years.  So over the length of time it doesn't really matter what the starting stock market valuation is.  There will be several bear and bull markets during that time frame.   If you have existing loan with say, seven years left, it is still hard to say.   Even if stocks are on sale, they still might not perform well over seven years.   Opposite is true as well. 

The hard question is at the top of this thread.  At what threshold does paying off your mortgage start making sense?   I've thought a lot about this question and never came to a firm conclusion.   I have a 3.5% and a 4.5% mortgage.  They are both firmly in the "never, ever." category.    At 7.5%, which is about what mortgages are running now, I'm not sure what I would do.

How many mortgages actually last the 30 years though?  A google search is not coming up with the precise answer, but my guess is that the average mortgage is not far off from the average length of owning a particular home which is 8 years.  The confidence on an 8 year market return being is much lower than the confidence one would have for a long time frame like 30 years.

[dandarc]

I'm low-key looking for a second mortgage, so I guess "not yet", but in the past I prioritized paying off a sub-6% and a sub-5% mortgage. And both of those turned out to cost me a lot of money. So my line going forward is somewhere above that.

There's also a built-in option to refinance (usually - not always - you can find a way to refinance when rates go down) or actually to pay-off once you've built your wealth to that level, and until then having a larger mortgage and more liquidity is preferable in a lot of ways. So I'd have to evaluate why I'm getting the mortgage - right now it is simply an extension of the DPOYM play. At 6% I'm still doing it. The present 10-year treasury yield still puts the investment order thread's recommended cutoff for paying down debt at 7%. I think that's good enough for me actually - variable line based on current interest rates.

[Telecaster]

How many mortgages actually last the 30 years though?  A google search is not coming up with the precise answer, but my guess is that the average mortgage is not far off from the average length of owning a particular home which is 8 years.  The confidence on an 8 year market return being is much lower than the confidence one would have for a long time frame like 30 years.

You can use whatever inputs you like, but in a nutshell if you are going to evaluate the pros/cons of paying off a mortgage early, you must compare that scenario with holding a mortgage.   In the eight year scenario, the investment returns are more variable, but you also have less time to save on the interest by living in a mortgage-free house. 

[ChpBstrd]

I suppose it boils down to individual risk tolerance but I want to know if the interest rate at which you would pay off a mortgage early vs invest changes depending on whether stocks are "on sale" or not.

Not really.   When you do the analysis the question is interest rate vs. expected rate of return over the the loan term.   For a new mortgage, the term is probably 30 years.  So over the length of time it doesn't really matter what the starting stock market valuation is.  There will be several bear and bull markets during that time frame.   If you have existing loan with say, seven years left, it is still hard to say.   Even if stocks are on sale, they still might not perform well over seven years.   Opposite is true as well. 

The hard question is at the top of this thread.  At what threshold does paying off your mortgage start making sense?   I've thought a lot about this question and never came to a firm conclusion.   I have a 3.5% and a 4.5% mortgage.  They are both firmly in the "never, ever." category.    At 7.5%, which is about what mortgages are running now, I'm not sure what I would do.

How many mortgages actually last the 30 years though?  A google search is not coming up with the precise answer, but my guess is that the average mortgage is not far off from the average length of owning a particular home which is 8 years.  The confidence on an 8 year market return being is much lower than the confidence one would have for a long time frame like 30 years.

A decision to pre-pay a mortgage is equivalent to a decision to buy a 100% safe bond yielding your mortgage rate with a duration equal to the new last payment date on the mortgage.

So for instance, if I just signed a 30y mortgage at 6% and I decide to pre-pay one year's worth of principal payments, shortening the mortgage by a year, that is the equivalent of buying a 29-year bond yielding 6%.

Of course, my locked-in investment period might not last this long if I sell the house, get foreclosed, or refinance. Thus, getting out of the deal early has some costs associated with it that a bond would not have. But if you assume these things won't happen or will happen anyway due to reasons unrelated to the mortgage, it's basically a bond.

[simonsez]

Hard question to answer.  I have a sub 3% mortgage now, had refinanced twice (from 4.625, then from 3.750), and this is my first house.  When my rate was 4.625%, I still wasn't that close to considering making extra payments.  In the "considering-buying-a-house" years of my life, the going rates for mortgages have never been that high compared to historical mortgage averages/variation.  Part of me wants to say that at 7% I would start paying extra as that is higher than what my remaining student loans are (6.8 or 6.55) and the long-term real market average returns around 7% but would I really?  I'm not sure, I haven't ever been in that situation. 

I do like the current level of cash flow my household has and feel we are "consuming" the amount of house that is right for us (2BR, ~1000 sq ft) currently.  Provided the interest rates were below 7% when we bought, the amount of house we were going to purchase was inelastic as we would never be "tempted" to purchase more just because the rate was low, if the rates had been higher then we'd either have waited or started reducing the amount of house we were in the market for.  If the going mortgage rates were 7% or 8% and we were in the market for a house to own, would we really pay extra or would we be investing more with the assumed market opportunities or would I change from a 30 year to a 15 year mortgage or would there be an interest rate that we would simply wait to pay cash or simply just rent?  Hard to say as higher rates do limit buying power via cash flow.  Also, there is a big difference in the style of pre-payments to a mortgage.  E.g. the household that makes the equivalent of 13 total payments in a year (1 extra) is different than the household that 18 total payments (they pay 1.5x each month) in a year.  So two households both might be pre-paying something extra but it could vary enough that the household making small prepayments might be more similar behavior-wise to a household who is not pre-paying at all rather than the household that is aggressively making pre-payments.

For n=2, I have two sets of friends who have removed themselves from the current housing market due to the mortgage rates.  One household sold their house in August and is going to rent for around a year or so while they can do more research on the areas they are going to live in and hopefully have a lower mortgage rate at the time or a lower purchase price (if not, then I'm sure they would either change their budget or continue renting for longer or some other contingency).  The other set of friends were already renting and are going to continue renting for now.

[yachi]

The graph leaves something to be desired.  Instead of a bar graph, it really ought to be presented as a line graph, with all 4% votes also included in the 5, 6, 7, 8, 9 and 10 categories.  The y axis would be something like % of respondents that would pre-pay a mortgage.

[Shuchong]

How many mortgages actually last the 30 years though?  A google search is not coming up with the precise answer, but my guess is that the average mortgage is not far off from the average length of owning a particular home which is 8 years.  The confidence on an 8 year market return being is much lower than the confidence one would have for a long time frame like 30 years.

A decision to pre-pay a mortgage is equivalent to a decision to buy a 100% safe bond yielding your mortgage rate with a duration equal to the new last payment date on the mortgage.

So for instance, if I just signed a 30y mortgage at 6% and I decide to pre-pay one year's worth of principal payments, shortening the mortgage by a year, that is the equivalent of buying a 29-year bond yielding 6%.

Of course, my locked-in investment period might not last this long if I sell the house, get foreclosed, or refinance. Thus, getting out of the deal early has some costs associated with it that a bond would not have. But if you assume these things won't happen or will happen anyway due to reasons unrelated to the mortgage, it's basically a bond.

Interesting point re: duration.  I have a relatively high mortgage rate on a house I just bought (270k at 5.375%, though down to 3.26% after tax since I itemize and work in a tax-loving state).  I've been comparing it to my bond holdings.  I have ~$110k in ibonds that I could use to pay the mortgage down, but that doesn't make any sense, since those are yielding at least 9.62% right now tax-deferred.  I have ~180k in Vanguard's total bond fund, sitting in a 401k.  Current SEC yield is 3.88%.  Also doesn't make sense to use that, for many reasons.  I have a 30k short-term treasury ladder in taxable, with an after-tax yield of 2.2%... but it doesn't make sense to use that either, since I may need $10k of it in the next few years, and since $20k is earmarked for next year's ibonds.  But in all my thinking about the mortgage as a negative bond, I've never considered the duration of the mortgage or the duration of the bonds.  If inflation settles down, I suppose I'll have to make some calls about the expected returns on the ibonds going forward for the next 20-30 years.  And if inflation doesn't settle down, perhaps there is a call for buying a 30 year treasury bond and matching my mortgage liability with a higher-paying safe investment. 

[use2betrix]

We’re looking at homes right now (around $400k-$600k range). The 7% rates are definitely not appealing. We have enough in after-tax investment accts to pay cash for a house in this range. Unfortunately, I’m not selling my VTSAX when the market is down 20% to pay off a 7% mortgage..

If the market was still sky high, I’d likely consider putting down more than the 20% planned down payment.

In all actuality, we’ll probably cool our jets for 6-12 months and see how things play out. My prediction is that this will turn into much more of a buyers market. Locally, it already is. Houses are actually sitting on the market way longer and prices are dropping..

[TomTX]

How many mortgages actually last the 30 years though?  A google search is not coming up with the precise answer, but my guess is that the average mortgage is not far off from the average length of owning a particular home which is 8 years.  The confidence on an 8 year market return being is much lower than the confidence one would have for a long time frame like 30 years.

Well, my original mortgage for this house was started in 2005. Refinanced twice to lower rates. The most recent was a few years ago: no-cost refi via my CU, and reset to 30 more years. There was barely any difference in rates to go down to 15 year, so we stuck with 30.

[TomTX]

The Pay Off Your Mortgage (POYM) versus Don't Pay Off Your Mortgage (DPOYM) debate has raged for years, but as of today (9/22/22) 30 year mortgage rates have risen to 6.3%. Forecasts say 30y loans will peak at 7.5%, but they could go even higher.
https://econforecasting.com/forecast-mort30y

Maybe holding a 3% mortgage was seen as a no-brainer, but what are your thoughts at over twice that interest rate? At what point would it make sense to plow money into mortgage payoff, instead of your investment AA? At what level is the risk-free return of mortgage payoff higher than what you'd expect from your AA?

Assume you only know as much about the future trajectory of inflation, stocks, bonds, or housing prices as you know today.

So, I picked 7% - even brand new I-bonds are yielding almost that much today, and the mortgage has the possibility of a future refi when rates drop again in the future. Are rates likely to drop? The markets seem to think so - if you look at the Treasury yield curves, peak rates are found at 1 year or less, with the 5-30 year maturity all about 1% lower than the 1 year.

[Dicey]

I put 4% for the poll , since that's close to the loan rate i'm currently paying.  I think it might have to be as low as 1% for me Not to pay extra.

 Am working on the " One extra principle payment a year will lower time paying the mortgage by approx 7 yrs [ on a 30 yr loan] "   rule of thumb.

  It's not going to beat the markets, i realize that. But i find it a usefull goal.

You might come out ahead by buying a other car instead.

[grantmeaname]

Weird choice to come show up and dunk on a six month old post in a dead thread

[Dicey]

It happens. Meh.

[yachi]

We might pay it off early regardless of the interest rate.  Our oldest goes to college in 6 years, and I"m not sure we'll spend all of our brokerage account before then.  Our AGI makes it so there'd be about a $160,000 FAFSA benefit to dropping new worth from 200K to 10K.  That's considering 4 kids.  FAFSA's definition of net worth excludes home equity, IRA, and 401(k) accounts.

[TomTX]

Weird choice to come show up and dunk on a six month old post in a dead thread

...where the most recent post was someone saying they would re-evaluate in 6-12 months...

Oh, wait.

Seriously, it's still a relevant topic.