Okay I have another one, who here NEVER will pay off their home loan (purposely)?

Iceman · May 19, 2007

Since my truck loan thread had smarter/more risk taking responses than I anticipated, has anyone looked into never paying off their home loan?

I just finished reading a few books about this "arbitrage" idea of investing at a higher rate than your home loan is. So for example if you have a interest only home loan of 6% and you can invest (they say in life insurance type investments, not exactly sure how these work) in tax free 10% type returns than you are essentiay doing the same thing the bank is doing with your money.

The book "Untapped Riches" and "Missed Fortunes 101" go alot further in depth with this. It seems to be the new thought process of the 2000's when it comes to investing. They are basically saying that home loans is a cheap way to get your hands on money (cheap money).

I could throw out some more stats but am in the middle of playing poker, but the numbers look pretty good.

Anyone do this? After reading some of my truck loan respones we should have a few that do this.

joeyfitzclick · May 19, 2007

As I've told you before I constantly tap the equity in my properties. I probably close on a HELOC about 15 times a year.

quantumleap · May 19, 2007

People with enough money to pay off their home loans rarely do. The reason is that they can make more investing that money somewhere else.

joeyfitzclick · May 19, 2007

Iceman said:
Since my truck loan thread had smarter/more risk taking responses than I anticipated, has anyone looked into never paying off their home loan?

I just finished reading a few books about this "arbitrage" idea of investing at a higher rate than your home loan is. So for example if you have a interest only home loan of 6% and you can invest (they say in life insurance type investments, not exactly sure how these work) in tax free 10% type returns than you are essentiay doing the same thing the bank is doing with your money.

The book "Untapped Riches" and "Missed Fortunes 101" go alot further in depth with this. It seems to be the new thought process of the 2000's when it comes to investing. They are basically saying that home loans is a cheap way to get your hands on money (cheap money).

I could throw out some more stats but am in the middle of playing poker, but the numbers look pretty good.

Anyone do this? After reading some of my truck loan respones we should have a few that do this.

On my 27th birthday I refinanced 6 properties into low rate 15 year fixed mortgages. All the other properties in do 5 year arms or 30 year interest only and tap their equity constantly. On my 42nd birthday no matter what I do in the interim I will sell those 6 properties outright, pay the man, and retire/semi retire. In the meantime the equity in my other properties sufficiently supplements my annual income, but of course 10 years from now (I am 32) I will still carry high balances.

sean1 · May 19, 2007

Why ever sell them and pay taxes?

I'd personally prefer to pay a manager, tap the equity every year and die $100million in debt....

Sean

joeyfitzclick · May 19, 2007

Moving home.

fhmesq44 · May 19, 2007

I won't pay mine off. I am of the same opinion as Joey and Sean, use that money to invest in other higher returning (as compared to the cost of the debt) assets. Keep an equity line as a second on your house and you can pull and pay down as you choose/want/need. This also provides you with flexibility should you run into a shorter term emergency and need some cash.

I wouldn't always keep 80% debt on my personal residence, but I don't think I would go below 60% ever.

With good credit, debt is cheap right now. I suppose if that changes I may change my tune some, but not at today's rates.