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.

  • came_apart_at_Kmart [he/him, comrade/them]
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    edit-2
    2 months ago

    investing disposable income in stonks and financial instruments is also totally the move that serves large capital formations and "line go up" nonsense. paying down debt fucks them over. capital formations trade and speculate on mortgages as "assets" because they essentially buy them in the expectation that you will pay all the interest you owe over time, giving them a cozy ROI. they pretend the risk is delinquency or foreclosure, but in that case they get the house and can sell it, so they absolutely get theirs. the GFC was the only time they actually were in trouble because too many mortgages shit the bed at once for them to execute the logistics of foreclosure/sale and suddenly nobody was buying shit so the houses suddenly weren't worth what the loans on the books were. of course the government bailed them all out, so in the end the capital formations were saved.

    anyway, another cost of not paying down the mortgage rapidly is that having low equity in the asset gives them the excuse to stack on bullshit like Personal Mortgage Insurance. typically, if your equity in the house is less than 20% they make you pay premiums to cover insuring your mortgage in case you stop paying. meaning, if you stop paying your mortgage, they are insured for the value by insurance you pay for! that's the real aftermath of the GFC, now we have to pay insurance to protect the lenders.

    anyway, more calculation fun: to borrow $200k at 5% interest means paying back $386,511.57 if you pay it off on schedule over 30 years. if you throw an extra $200 to principal each month, you end up only paying back $274,351.06. also, to pay down the principle earlier in the mortgage is more effective at avoiding interest.

    more often than not, if there's some investment opportunity earning interest on some security/financial interest greater than your mortgage, it is because some mass of workers / borrowers with less institutional power than you (bad credit, desperate circumstances) are getting the screws put to them even tighter than you are with your mortgage. or it's some wack "hey man, this bank in cyprus is paying 15% interest on deposits!" type of shit that is gonna implode and should be avoided anyway. to chase the larger growth over paying down your debt is typically stacking your chips on the downstream exploitation. it's literally how for profit banks work: borrow at 4% from the wealthy, lend at 5% to the poor.