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][quote=Anonymous]Most people would call us.  We have a paid off $3m home.  Rich people are not stupid.  How do you think we got rich?  Of course we understand economics, leverage, opportunity costs, capital investment, etc.   If you have the $$ it's liberating to pay off of the primary family home.  [/quote]

THis^^^

Then you are free to invest that money wherever you want to.  Right now that money can earn a guaranteed 5%+ in CDs---$150K/year in cash guaranteed
[/quote]

Let's say you has a $1m mortgage, and the cash to pay it off immediately.  Then you can start investing the $8 or so mortgage payment into a guaranteed 5% CD each month.  That's great.

But now lets say you take that same $1m and invest it into the 5% CD all at once.  You still have the same amount of security - you can pay off your home immediately, if you like - but you are earning interest on the $1m at the same time.  And that $1m is available for other emergencies, without the time and expense of a HE loan.

Please explain how scenario 1 is better than scenario 2 *in financial terms*.  .  [/quote]

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