“I have an extra $100,000 coming in over the next couple of months. Should I invest it or pay down my second mortgage?”

The way I think about this is simple:

We should be allocating to the opportunity with the highest risk‑adjusted expected return.
Every dollar is competing for a job.

Let’s say your second mortgage carries a 6.5% interest rate and you’re not getting any tax deduction on that interest.

Paying down that mortgage is effectively like earning a guaranteed, 6.5% return:

• No volatility
• No drawdowns
• No uncertainty

You know exactly what you “earn” by eliminating that cost.

Now compare that to investing in stocks.

Could stocks earn more than 6.5% over the long run?

Absolutely.

In fact, I would expect them to.

But those returns are uncertain:

• They come with volatility
• Occasional 40%+ drawdowns
• And the possibility of disappointing results over multi‑year periods

So the decision isn’t:

❌ Debt vs. investing

It’s:

✅ A guaranteed 6.5% return
vs.
✅ A higher expected, but uncertain return

That’s a much different framework.

When mortgage rates were 2%–3%, investing excess cash was often the obvious answer.

At 6%–7% borrowing costs?

Paying down debt becomes a much more compelling use of capital.

Everyone has a different risk tolerance.

What I’ve found, though, is that many people overestimate how much volatility they’re truly comfortable with… until they’re living through it.

Personally, I’d take the guaranteed 6.5% return.

That won’t be the right answer for everyone. Tax situation, time horizon, liquidity needs, and other goals all matter.

That’s what makes this job fun!