I don't think it is that simple.Ok so if you pay a lump sum off your mortgage you get a return which is guaranteed and is 4.3% (to be adjusted for the loss of interest deduction) after tax.
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As the 4.3% loan interest rate applies to the reducing capital balance over the life of the loan, over 21 years the effective return on a lump sum investment to reduce the capital is much lower than 4.3% unless the reduced or eliminated monthly mortgage payment ( net after paying the extra income tax) is reinvested at 4.3% guaranteed return during the 21 year period. This is not possible.
His investment to pay off the mortgage is 100k.I don't follow this argument.
Would it make any difference if Foodie had a mortgage of €100k and €100k in his current account? I don't think so. Paying it off his mortgage saves him the 2.7% he would have paid for the foreseeable future.
Brendan
Yes, as long as the capital balance on the loan exceeds 10k.Hi Joe
Do you agree that if he pays €10k of a €100k mortgage with 21 years left, he gets a return of 2.7% for at least the next 10 years?
Brendan
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