[Valerie]

I have a $66k mortgage on a rental property that has a 4.375% mortgage and I have the cash to pay it off sitting in a HYSA earning 4.67%.

If I get taxed on the interest from the HYSA at a rate of 22%, doesn’t that actually drop my HYSA rate to around 3.64%, so wouldn’t I be better off paying off the rental?

[Mike]

Not sure of your larger financial position, but I’d assume the interest on the rental property is deductible against the income (rent). So, your effective interest rate there is probably lower.

You also probably couldn’t borrow that much cash on a 10+ year term even after recent rate cuts.

So, I’d leave that mortgage alone. Bigger question is, what opportunities or other problems could your HYSA be getting after?

[Robert]

When those are your only choices; you’d obviously be better off paying off the rental.

But if it were me, I would take that 66K and either put it in a tax-advantaged vehicle; or if a tax-advantaged vehicle is not possible; dump it into a taxable brokerage account; dump it all into a fund that mimics the S&P 500; and forget about it for the next 30 to 35 to 40 years.

[Barron]

Remember the tax advantage of the mortgage interest. The answer to this to me come down to age and risk profile.

If you are young and still scaling, I’d leave that mortgage alone and take that cash and invest it in something that will give you a better return on your money than a HYSA.

If you are nearing retirement, I would pay the mortgage off and prepare to be as debt free as possible in your golden years

[Lorenzo]

Can you write off the interest of the rental? If so then you’re making money .2225%.

But if I was in your position, I would just pay it off and write off the profits somehow.

[Ryan]

Ask yourself this:
Would you take out a 60k loan on the house to put that money into a hysa?

[Vishnu]

Congrats on your journey! Either ways you’re in a great place.
The difference is about $680 a year or $57/month depending on your decision.

It seems pretty negligible in the grand scheme of things.

Not everything needs to be optimized all the time.

If paying off the mortgage gives you peace of mind then do that, it will also increase cashflow.

However, If having the cash on hand helps you sleep at night, then do that. That’s just my opinion.

[Ben]

You could also look at it as paying 1% a year to have greater liquidity.

[Author]

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