Math, and Why Happiness Isn't an Equation.

     So, anyone who has spent anytime reading modern personal finance philosophy will notice that the consensus is weighted rather heavily toward the side of "don't pay off your mortgage quickly, invest instead." The reason for this is math. Any extra you pay on the principle of your mortgage will yield "returns" equal to your interest rate. You'll notice I put returns in quotations. The reason for that is that you don't see actual returns, what you actually see is savings. I think this is a return because, quite simply, it is still money you would not otherwise have. In our low interest rate years that have persisted for sometime, most folks have an interest rate under 5%. So, at best your early payments yield 5% returns.

    The reason most out there will advocate against early payments is because the stock market historically yields better. Traditionally in the 6-9% range. Keep in mind too, due to compounding, that a 2% difference is not 2% more money. The difference in 10K invested for 20 years at 7% and at 5% is $13,260, which of course is not inconsequential. So of course, if you can save additional money and invest it as opposed to paying your mortgage, with the power of compounding, you can rather quickly get to a point where your passive income from that investment will cover your cost of rent, and much like owning a property, you essentially have no cost for month to month housing (ignoring maintenance of course). 

    Generally, in most cases, you would mathematically come out with more money at the end of the scenario in which you invest excess as opposed to pay down your mortgage. Thus the majority consensus. 

    But happiness isn't an equation. The part that gets left out, is the day to day lifestyle. For some  people, owning the home is an important part of day to day happiness. I think for people who despise inefficiency, or love efficiency, or in most cases both, owning the home is a critical part of day to day happiness. There is something extremely satisfying about seeing a problem, developing a solution, and implementing it. If you rent a place, you rarely have this option. 

    It's true that when you factor in the cost of maintenance of owning vs renting, the rent/invest strategy comes out even further ahead. My only issue is that I derive far more happiness from replacing something broken with an elegant or efficient solution than I would from looking at my bank account before and after the landlord makes repairs and seeing that the number has grown. Just me. 

     I'm going to do a more in depth analysis of our particular case to see exactly what the difference in earnings, net worth, etc. would be in the two scenarios. Full disclosure, I have not done this yet, so I do not know exactly what the gap will be. 

     So why make such an uniformed decision when the math is relatively straight forward?  

Simple. 

We made the decision on happiness. Happiness isn't an equation.