When I calculate how much interest I would pay over the life of everything I feel like I am just throwing money away for nothing…
There is a popular mis-conception that when you are paying interest, you are throwing money for nothing. What you really have to look at is 2 things:
How much is it costing you to borrow some money per year (after taxes)? If you took the same money and put it to good use, how much would you earn on that money (after taxes)?The reason for doing it after taxes is to adjust for the fact that stock appreciation/dividend income is taxed at a lower rate and mortgage interest deductability has become very limited. Don’t know how the biz loan works for that purpose.
If 2 is more than 1, then you are definitely not throwing money away. If 1 is better than 2, then yes - you are throwing money away. But you also have to factor in pre-payment penalty - i.e. if 1 and 2 are the same, 2 wins because it has no pre-payment penalty.
Answer to #1 is probably simple. Answer to #2 - depends on your risk tolerance etc. 95% of the guys on these forums hear stocks/options and they start wetting their pants. Given that, I think the answer is that you probably should pay off. Also, if there is no deductability of interest, I would take the “assured” 5% return by pre-paying early. But if there is deductability and the real interest rate is 3%, I would invest that money for the long term.