Interest: To Pay or To Earn

With interest rates on the rise, is there a new way to look at your cash?

It’s always been my rule of thumb to pay off mortgages as soon as possible, in order to minimize the amount of money I am paying in interest on those properties. 

Lately I’ve noticed a shift in my mindset, and it just goes to show that it’s important to adapt to the changing times.  After having locked in a few 30-year mortgages with rates in the 2% and 3% range, I find myself wanting to minimize the amount I pay on those mortgages and instead keep my cash earning at a higher rate than what those loans are costing me.

Make sense?

This can open up an even bigger conversation, regarding whether or not it is generally good to pay off mortgages as fast as possible.  Some people argue that it’s best to hang onto a mortgage as long as possible because the amount that you pay in interest is tax-deductible.  I’ve never adhered to that mentality, because the way I look at it…for every dollar you pay in interest, you may save about 25 cents in taxes.  Just doesn’t seem worth it.  BUT, if I can be earning more interest on cash than it is costing me to hold the mortgage, that does seem worth it.