Graham: why I paid off three 2.875% mortgages

Graham recounts a decade-long shift from treating low-rate mortgages as "free money" to voluntarily paying off three super-low interest loans (as low as 2.875% fixed for 30 years) and feeling a surprising psychological benefit. Early in his career he deliberately used cheap debt as leverage: denied credit at 21 for lack of history, he then built credit and financed properties (an $800,000 West Los Angeles loan at 3.375%, duplexes at 3.5% and 3.6%), arguing the only thing that mattered was the spread (borrow at 5%, invest at 12% = 7% gain). He gives a concrete example: a $600,000 duplex with 20% down, 3.5% mortgage and net 8% rent cash flow yields a 4.5% spread plus a 5% appreciation that translates into $30,000 on an original $120,000 investment (about a 25% return).

The pivot came after selling properties and seeing his "debt" category drop by millions: Graham reports an immediate mental "weight lifted." He polled Twitter (almost 4 million views and 1,500 replies) and found almost nobody regretted paying off low-rate mortgages. He cites research showing debt repayment reduces anxiety, improves decision-making and cognitive performance even for high earners, and that the count of accounts matters regardless of interest rates. He also cites the Journal of Public Economics finding that about 38% of households who paid down mortgages instead of maximizing tax-advantaged retirement were making the wrong choice, costing between 11 and 17 cents on every single dollar.

Graham’s practical takeaway balances math and mental health: maintain a dedicated emergency fund, take an employer 401k match, pay down high-interest debt first, then consider paying the mortgage if you value peace of mind. He concedes that if your only goal is maximum returns, arbitraging a mortgage below ~4–4.5% still makes sense; but for him the reduced cognitive load and simplicity after paying off loans justified the decision and will affect how he manages future homes.