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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 [b]take out a mortgage for 6% and invest the difference in the stock market at 10%[/b]? And then when interest rates drop, they can refinance to a lower mortgage rate.[/quote] Like my corporate finance professor used to say -- it sounds like you invented a money machine! You have a way to borrow at 6% and get a guaranteed 10% return? Great! Why doesn't everyone do it? The answer of course is that there is no guaranteed 10% return. For example, if you put money exactly 1 year ago into QQQ (Nasdaq ETF) you'd be down 13.18% as of today. [/quote]
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