Math vs. Peace of Mind: Investing in taxable brokerage vs. paying down an ARM?
My partner and I have a $435k mortgage currently on a 2.87% ARM ($2,400/month) that will eventually adjust to 4.87% (~$2,900/month). We’ve recently reeled in our discretionary spending, freeing up about $6,000 to $7,000 in surplus cash each month, and we are torn between aggressively paying down the house or investing the extra money into a taxable brokerage account tracking the S&P 500. While I know the long-term math generally favors the market over a 4.87% interest rate over a 10- to 15-year horizon, I’m curious if anyone has chosen to tackle the mortgage instead for risk mitigation or peace of mind. Assuming our tax-advantaged retirement accounts are already on track, what are the strongest arguments—mathematical or psychological—for choosing to pay down the ARM over investing the surplus?
Another thought I had was in 15 years, sell this house once it appreciated and get a smaller one in cash and have no tenants.
Further context - my sister lives with us paying ~$800/month so our mortgage is pretty light work compared to the amount we paid for rent the past 5 years.