We agree on most of this, ER. Like much in economics and finance, decisions hinge on assumptions we must make with imperfect knowledge. If the MR does go up 2% a year (which is not assured–they went down for the past two years), then my 4.2% hurdle becomes 6.2%. Since I have 6% mortgages I could pay down with this money, its a tossup.
One question that has been batted around on this thread is whether paying off the MR translates automatically into a correspondingly higher value to the property. If not, IOW if buyers are not perfectly rational, then someone could lose by paying off the MR and then moving. So I should estimate my odd of moving in the next few years and factor that in to the decision.
In general, I think that buyers are pretty rational, and plug do MR’s into prices automatically. A heavy MR will lower a property’s value; its absense will raise it. For a buyer to swear off MR areas entirely would not be rational, since in newer areas they are practically impossible to avoid. If one has a family with school kids, MR is the price you pay for better schools, on average.
As for the close-together, grotesquely large and expensive new houses they are putting up around Santaluz in 4S and Del Sur, I agree with BG that they are not to my taste. But you are paying for the demographics, the shopping, and the resale value, and that is what is compelling to today’s buyers.