From a "finance" point of view, the sale of the house recouping an early bond payoff is a simple calculation, but the payoff is a cash flow decision. figure the bond percent of the home purchase price, say 10% and then estimate the annual increase in house pricing, compounding of course, so 5% increase per year, after two years, (1+increase%) ^ number of years = expected increase > 10% . you have recouped your bond pay off in the price of the house. 3% takes about 3 years, 2 % takes about 5 years. Asking real estate agents, whose goal is to sell houses without regard to a specific price level as the impact to them is minimal, may not get a "skin in the game" answer like you have all your "skin in the game"
So do the math, figure the cross over when the house price increase is greater than the house purchase plus bond.
But paying off the bond is a cash flow decision. Can you pay off the bond without impacting your income or your lifestyle significantly? Can you create a temporary saving account and put a fixed amount away each month to save without impacting your lifestyle?
No matter what, tax deductible or not, interest costs reduce your annual income, you can't get around it. Do the math, and if your tax bracket is 20%, you are still losing 80% of the interest in after tax cash flow.
Using the cash for investment income versus paying off the bond and interest has risks as well: the risk is that the income producing stream will continue as long as your bond is not paid off. 20 years ago, you could have 40K in treasuries and get a 5 % interest rate, and you would have thought that situation would be stable indefinately. The point is that there is risk in the income stream, uncertainty that the income stream will remain long enough. There is no uncertainty that the bond payment is due with interest.
So from a finance fiduciary point of view, the best answer is to always pay off the bond ASAP whenever your cash flow scenario can support the payoff. There is no "savings" from not paying if off if you can. There is no free lunch in finance, but there are mental accounting tricks which may convince you there are.
Mental Accounting - Biases & Heuristics | The Decision Lab
or google behavioral finance - mental accounting
Same question: which choice would you make: $10,000 today or $13,000 in a year from now?
Different question: which has the higher cold war ROI: a battleship or a spy?
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