Originally Posted by CFPMatt
I think the answer comes down to risk tolerance. If you don't like risk, pay off the mortgage as you go to get the guaranteed return and if you don't mind taking some risk, use the sinking fund approach.
There are, of course, different kinds of risk. I think you've addressed the conventional "standard deviation of my investment returns" risk. There are other risks/opportunities that can best be avoided/seized with a wad of readily available cash. When folks no longer have an income stream, it's hard to turn a house into that. When mortgage rates go up it will be expensive to turn a house into that for anyone. On the other hand, a wad of cash can always
be used to pay off the house.
Do all these folks who breathe a sigh of relief at finally paying off the house ("now I'll have a home regardless of what happens") live in places without property taxes?