Mortgage rates are in the news again as the average rate on a 30 year fixed mortgage reached 4.6% this week. It was the highest the rate has reached in the last 7 years – up 0.7 percentage points from where they were at last year. Fifteen year rates are also up – reaching 4.15%.
These rates are still incredibly low relative to what they have averaged historically. Since 1971, the average 30 year fixed mortgage rate is about 8%. They have been as high as 18.6%, in 1981, to as low as 3.3% in 2012.
I’m a proponent of paying off your mortgage early as a risk-free way to give yourself a 4.6% investment return. I’ve written about friends that think that in this low interest rate environment it is better to invest the money in equities and that has been a winning strategy for most of the last decade. Those folks have made a bet that has paid off handsomely.
That said, if you have a short horizon to reach your escape to early retirement and FIRE (financial independence & retiring early), it’s probably best to pay down that mortgage now and give yourself one less worry. We paid ours off about 4 years before I quit working and have felt great about it ever since.
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