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Comment by sangnoir | Hacker News Reader

> Something fundamental changes in your life when you become debt-free.

Being able to pay off a debt at anytime is equally freeing, for me at least. Paying off a loan with an interest rate significantly below inflation is not a great use of money[1] (and an opportunity loss). Putting that lumpsum into bonds (any bond with interest higher than the loan) is better, or even investing in stocks with a stop-loss. If I lose my job and have to flip burgers, that's when I'll pay off the loan and get a little extra from the investment/bond, thanks to the power of compounding interest.

1. Its the equivalent of someone offering you a 6- or 7-figure loan payable in 20/30 years at 2-3% when inflation is 6%, and you decline.

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>> Being able to pay off a debt at anytime is equally freeing,

Let me remind you that in 2008 things were so screwed up, some lenders lost track of who owed what. Having a hard copy document that shows a debt was close out is not the same as having assets that could pay off the loan. Keep in mind too that it was also not a good time to trade investments for cash.

There are risks in every approach. I can't imagine taking out a loan on a property today and investing the money thinking it will beat the interest payments over the next couple years. At other times, it's less risky but the rates will probably also be higher at those times.

The opportunity loss is what I don't get. Without the debt you can take on new debt that could be say a rental property or business loan.

How is a bunch of money tied up in debt, and an equal amount invested to hedge that not a huge opportunity sink?

It's hard to argue in the abstract without figures and expected returns. If paying off the debt opens the door higher returns, then I'm all for it. All things being equal, I'll keep $250k cash with a $250k mortgage at 2.7% today, as opposed to a paid-off house and a $250k hole in my account.

There is no loss of opportunity. You can borrow against invested money at very low interest rates, lower than mortgage interest rates, and people often do. In today's crazy real estate market, when people make "all cash offers" that is often just cash borrowed against securities. It is some of the cheapest debt that exists.

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