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<<"Go back and see my description of scenario 2. You hold enough cash to pay off the mortgage, but you hold it rather than the mortgage bank holding it">>

If you are holding that much cash, you aren't making 12% on your money, no way......and that was the premise of your argument. Even assuming you could get 12%, and 10.8% is more typical, on your stocks, in your scenario, you have to be holding lots of 'cash' or equivalents...and we are not talking mutual funds.....they aren't cash, and they can drop 80%. They have dropped 50% in 2 years ('73-4)


Now I am confused. I wasn't discussing rates of return, but rather relative safety of holding a mortgage and holding the same amount in cash, or paying off the mortgage.

Aha ... I just went back to the original post and see the discussion on rates of return. I was discussing something alltogether different. (i.e. relative safety of having liquidity versus a paid off mortgage)

In my case, I like my 6.625% mortgage and I also like the safety of holding at least that much in cash in a tax-free municipal money market account as well. This gives me more flexibility than having a paid off mortgage and only 6 or 12 months of cash in an emergency fund. To each his or her own !
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