I welcome someone to check my math, the result was a little surprising to me, but I guess it has to do with the declining balance interest payments:
I ran a $100,000, 30 year mort @ 3.5% on a calculator. Says total payments are $161,656. OK.
If I invest $100,000 and let the int/divs compound, I find I need only 1.61% returns to 'break even'. If I get 5% returns, I manage a profit of $270,538 at the end of 30 years.
EXAMPLE: 1.05^30 = 4.32194 times $100,000 - $432,194
Subtract the $161,656, and you have $270,538
Taxes not taken into account, but a rough cut would be assume no deduction, and divide the returns by .85 for a 15% tax rate on earnings. That just bumps 1.61% up to 1.9%, and the 5% to 5.88%.
That 1.9% seems like a pretty low hurdle to me, over 30 years.
Any bad assumptions/calcs there? Inflation should not be a factor, as the mortgage is not adjusted for inflation, right? So I just need those numbers as simple returns, not in 'real' (above inflation) returns?
-ERD50