TL;DR
In a stable, mature market, a longer mortgage term is better, because investing the monthly savings in stocks beats the extra interest paid.
Many people see a mortgage as a burden and rush to pay it off. But a Silicon Valley investor's calculation may surprise you: the longer the term, the better — the key is not to be in a hurry.
A mortgage is usually the cheapest long-term loan an ordinary person can get. Inflation eats part of the real cost: with a 4% rate and 3% inflation, the true cost is just 1%.
Invest the money you save
Say you borrow $1 million at 4%. A 20-year term costs $6,060 a month; a 40-year term only $4,017, saving $2,043 each month.
Put that into an S&P 500 index fund (10% annualised), and after 20 years Bai Suzhen's fund is worth $1.397 million. Pay off the remaining $690,000 mortgage, and she's still $707,000 ahead of Xu Xian, who paid off early.
Twenty years later, her fund is $10.836 million, $6.69 million more than Xu's. She paid more interest, but investing earned far more.
Conditions: stable cash flow and disciplined investing. In the US, refinancing tools can also help optimise the term.
In short: don't lock idle cash in a house — let it work in the stock market. That's a leverage move ordinary people can use.
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