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

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

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[quote=Anonymous][quote=Anonymous]You always see it on the real estate forum: “Oh, that’s a $4 million house so interest rates don’t matter.  At that price point, people are just paying cash.”  Don’t those rich, smart people know that they can just take out a mortgage for 6% and invest the difference in the stock market at 10%?  And then when interest rates drop, they can refinance to a lower mortgage rate.

I finally have enough saved up to pay off my mortgage, and it’s the greatest feeling in the world.  I am actually violating my own rule a little bit – right now, I have the money in I Bonds and short-term Treasuries, but only because they’re risk free and paying a higher rate than my 4% mortgage.  But the minute the interest rate drops below my mortgage rate, I’m cashing out and paying off my mortgage.  It’s such a huge stress relief to have arrived at this point.

My only meaningful expenses going forward are going to be food, utilities, and property taxes, along with the occasional home repair.  It feels incredible because I now require very little income to survive. And I assume super rich people also feel that way since many of them don’t use mortgages.  To me, part of being rich (even though I’m not “rich” yet) is not having to make every decision purely based on maximizing money.

For example, you could say that some rich people are dumb because they take significant amounts of leisure time – don’t they know they could be working and earning more money?  But at a certain point, it’s not all about the money - it’s about your lifestyle and how you feel getting from Point A to Point B.  Thoughts? [/quote]

Consider the “after tax” component of your investments and the state you live in, whether it’s long term or short term capital gains, etc. with interests rates hovering around 6% now and finished ability to deduct mortgage interest, it’s hard not to take the tax free 6%. Of course, the math changes greatly if you’ve locked in a sub 3% rate or whatever. [/quote]

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