If paying off your mortgage is dumb, why do so many rich people do it?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Only poor rich people hang on to debt while claiming they're doing so because it's the financially smart thing to do. If you are "choosing" not pay off your mortgage it's because you're not rich enough to pay it off early and save for retirement. There's no shame in that.

Is Mark Zuckerberg poor?

https://www.fool.com/the-ascent/mortgages/articles/why-did-mark-zuckerberg-get-a-mortgage-on-his-home/

How about Elon Musk?

https://www.fool.com/the-ascent/mortgages/articles/elon-musk-has-billions-but-still-took-out-mortgages-heres-why/

This is one of those facts that is very true but does not tell the whole story.

Simply put, people are willing to loan them money against a portion of their vast stock holdings.

They never sell a share and as long as the stock continues to rise they are making money, and if their stock tanks they hand over the number of shares without any cash. And since they never sell the shares, it does not affect the stock price, as wall street hates when founders sell shares.

Here's the magic part for them: Since it is a loan, it is 100% tax free. Yeah, they will have to pay the taxes someday, when they liquidate, but the value of the assets they bought with the cash are likely more than higher to make up the difference.

As they say, good deal if you can get it.

They have mortgages, which are loans against real estate, not securities. In any case, PP claimed that “only poor people hang onto debt” and if you don’t pay off your mortgage it is “because you are not rich enough.” That is obviously and stupidly false.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Only poor rich people hang on to debt while claiming they're doing so because it's the financially smart thing to do. If you are "choosing" not pay off your mortgage it's because you're not rich enough to pay it off early and save for retirement. There's no shame in that.

Is Mark Zuckerberg poor?

https://www.fool.com/the-ascent/mortgages/articles/why-did-mark-zuckerberg-get-a-mortgage-on-his-home/

How about Elon Musk?

https://www.fool.com/the-ascent/mortgages/articles/elon-musk-has-billions-but-still-took-out-mortgages-heres-why/

This is one of those facts that is very true but does not tell the whole story.

Simply put, people are willing to loan them money against a portion of their vast stock holdings.

They never sell a share and as long as the stock continues to rise they are making money, and if their stock tanks they hand over the number of shares without any cash. And since they never sell the shares, it does not affect the stock price, as wall street hates when founders sell shares.

Here's the magic part for them: Since it is a loan, it is 100% tax free. Yeah, they will have to pay the taxes someday, when they liquidate, but the value of the assets they bought with the cash are likely more than higher to make up the difference.

As they say, good deal if you can get it.

They have mortgages, which are loans against real estate, not securities. In any case, PP claimed that “only poor people hang onto debt” and if you don’t pay off your mortgage it is “because you are not rich enough.” That is obviously and stupidly false.

Yeah except I did not dispute that part, I am telling you these are not mortgages in the traditional sense like regular people. And yes I personally know a few of these guys who have done this, from a mid-level CEO to a famous one. The mid level guy the company is not even public and he used the money to buy two properties in Hawaii and has never, and will never, make a payment.

Sorry to burst your bubble. Don't be so sensitive. You could have focused on the fact that I agree the super rich use debt.