Are you making a fair comparison that is in line with the argument many have about early mortgage payoff on this site?
We generally compare mortgage paydown vs. index investing, not mortgage paydown vs. T-bills. Big difference.
That being said, the second highlighted part is key here. After maxing out tax-advantaged accounts, mortgage payoff becomes increasingly attractive. But it's important not to concentrate your net worth in one asset - your house. While mortgage rates might be a steady 3.18% for 15 years, your house will go up and down in value similar to stocks or bonds. If your house is your only asset, it becomes more than just a roof over your head.
It is realistic in the long term to expect a 80/20 stock bond index fund to return 9% a year (Vanguard said 9.4%). Your house on the other hand will appreciate a little more than the rate of inflation over the long term (Case-Shiller says around 3.4%). Would you rather focus on growing an asset that returns 9%, or paying down a possibly tax-deductible loan on an asset that returns 3.4%?
I also believe cash flow is important, but not when you sacrifice growth and diversification.
Paying down a mortgage does not increase the amount of real-estate you have on your balance sheet. Paying down the mortgage reduces the debt on an individuals balance sheet which means the appreciation on the house is irreverent to this decision.
Partially true, but my point is concentration of assets in your house. So it paying down a mortgage fast might not increase the amount of real estate on your balance sheet, but it will increase the
net value of real estate on your balance sheet.
For example, let's say my real estate is valued at $500,000. If I put $100,000 down and pay it off in 15 years that's a monthly payment of about $2900. Compared to about $1900 if I pay off in 30 years.
Scen. A: If I only pay off my mortgage, in 15 years I have a house worth about $825,000 at the 3.4% return. If I run stuck and need some cash, I have to obtain a loan, probably against the house. That means an appraisal, legal fees, and interest costs.
Scen. B: If I invest that extra $1000 at 9%, in 15 years I have about $375,000 in the bank, plus a $825,000 house - $255,000 mortgage for equity of $570,000. That's a total networth of $945,000. Also, if needed the $375,000 in investments could toss off $15,000 a year at the 4% rule. If I run stuck somewhere and need a bit of cash, I can sell some of my investments at virtually no cost.
In 30 years, when the mortgage is paid off in Scenario B, the difference is even bigger because of the compounding factor on your investments. Scen. A gives you a paid off house and $1.08 million in investments (if you divert the $2900 to investing). Scen. B gives you a paid off house and $1.77 million in investments. That's a difference of three-quarters a million dollars.
It's a personal decision, but I'll take the extra $700,000 for no extra effort. Added bonus: I have the security of diversification the whole 30 year journey.