Tarabara wrote:The account is in my partner’s name, the LT capital gains would be 0% and the ST Capital gains tax would be 15%.
Maybe. Maybe not.
Your partner is in the 15% bracket now, but what bracket would these gains push him/her into? If the gains push your partner into the 25% bracket, all the gains above the line would be taxed at either 15% (long term) or 25% (short term).
What to do with the mortgage is one of those questions that generate A LOT of differing opinions. There is no consensus on what is "best". This likely means that it all comes out in the wash (long term difference won't be that much) and that your personal feeling about mortgage debt vs no debt should play a significant role in your decision.
Since you and your partner are not married under your state's laws, the protections for a surviving partner should also be considered. I actually doubt this is much of a factor if the house is jointly owned, but you should be sure.
The decision to pay off the mortgage is also one that doesn't have to be all or nothing. Refinancing has already been discussed (sort of a middle ground) and that's a good idea if you don't extend the years back to the point that you end up paying more in the long run. Another middle ground is to accelerate your payments by paying extra on the principal each month. Or refinance and pay some extra each month.
I think any decision or combination of decisions you make here is likely to be fine. It seems like there are no bad choices. Do what makes you and your partner feel good.
I would be cautious of ARM's in what could be a rising rate environment. On the other hand, you do have the funds to just pay it off in 5 years if the rates go up enough to be undesirable. In the meantime, you might be able to pay an extra low rate for that 5 years and save a little more.