One of my neighbors just decided to pay off their home. While the usual reason is the feel good full ownership of your primary residence, here their main reason was that they had money sitting around (beyond their emergency funds) that they could not invest with better guaranteed returns.
They were 6-yrs away from paying it off normally at 2.75% APR. Since they were not itemizing their mortgage interest, assuming their marginal rate at 22-24%, that looked to me fairly equivalent to a 3.4% 6-yr CD that you simply cannot break.
I’m guessing their balance was too low to make refinance an easy alternative considering their 2.75% rate. So that made me wonder at which point in very low rate environment, does it make sense to do what they did? I felt like I was missing something but I could not figure out what. Any ideas?