[gvibes]

But say you are in a 30% federal income tax bracket, and a 3% state bracket. Your effective interest rate on the mortgage would only be 4%. Any diversifed equity/debt portfolio will return substantially more than that (i.e. there is is a disgustingly high chance that, after 10 years, the cumulative return of the equity/debt portfolio would exceed four percent - and it would need to exceed 4.8 %, to offset capital gains taxes.). Actually, I think you could find a debt-only, tax-exempt bond-only portfolio that would return over 4 percent. Check out the Vanguard tax-exempt bond funds - other than the short term funds, the returns seem to range from 5-6% (conservatively).