My mortgage rate is many times higher than the interest rate on any of my savings accounts. I can try to get better accounts like an Money Market or a Certificate but I'd have to drop like 100k, which I don't have, just to get a rate comparable to my mortgage.

My mortgage is young so its currently over twice higher than my other assets. $1k in a certificate gets me $50 in a year. $1k lump to my mortgage saves me $2k in future payments. $1k extra annually saves me $15k. If I kept reinvesting that certificate I'd earn about $4K over the same timespan.

As I see it, I should be dumping much money into my mortgage as I can afford right now. Maybe when the account gets smaller than my other assets that'll change. But for now the only thing stopping me is having some actual liquid savings.

  • HelluvaBottomCarter [comrade/them]
    ·
    4 months ago

    Paying your debts can be better than investing the payment money. If you're in danger of missing payments, can barely make the monthly, or your credit usage is too high, then it is better. If you can afford to make smaller payments and you have a better investment opportunity, then you should do that.

    You have the intuition for the time value of money, paying a little now to keep from paying a lot later is good. Investing only works when you can buy a future payoff at a current discount. That payoff would have to justify the risk and not paying towards your mortgage. As you've noticed, not many low-risk opportunities are out there with a big enough payoff. So you're better off paying your debt to avoid interest. Basically preserve the money you have rather than try to grow it.