[Kirby64]

What do you think leverage means?

If I take a leveraged position on a stock via margin trading and the stock goes to $0 (or, more realistically, it dips in value enough that I get a margin call) then I owe the whole balance, not just what I put up as capital. This is true of literally any leverage. And on top of that, I pay a margin rate in the form of an interest payment based on the amount of money I have outstanding beyond my capital. Sounds familiar, right? Because it's exactly identical. The only difference between a mortgage and a margin interest payment is that a mortage is amoritized across the term and is a fixed period, whereas margin interest is indefinite and acts more like a HELOC (i.e., you only pay interest on the amount that you have outstanding... and that amount can vary over time).

I absolutely hate the idea that "paying X in interest means that's money you have to earn in addition to make it worthwhile". No, it's not. It's money you are paying to free up extra capital elsewhere that can be invested more efficiently. Unless you're spending well beyond your means (which, admittedly, some people do), then paying interest on a mortgage payment should mean making much much more elsewhere by investing money you would have spent on buying a house in cash.

[temporarara]

You HAVE to pay back your debt if you want to pocket all your profits. If your down payment is 25k and you buy 250k house, you need to borrow 225k for your "leverage". Now you get lucky and years later, AFTER you have paid 25k + 225k + interest + fees which amounts to at least 300k, prices have gone up and you can sell that house for 400k. Nice you think! I will make 375k profit just by investing 25k! NO, that's not how "leverage" works at all. At that point you have paid at least 300k to get 400k which makes not that great considering it's been 20 years or so.

The logic you are using is flawed beyond all reasoning to be honest. People who are in a position to both pay back their mortgages AND invest heavily elsewhere are already rich.

[Kirby64]

You don't make 375k in profit off a 25k investment (in your example) if you sell a house for 400k. You would make 125k in profit using your numbers (minus fees, interest, etc). It's exactly how leverage works, and the equivalent in margin trading is 100% identical. The only difference with a mortgage is that you slowly deleverage yourself over time as a consequence of paying off the loan (principal that goes to value of the loan).

As an example, if you sold a house 5 years into owning it, at current interest rates, you would only have paid down approximately 6% of the 30 year loan, so the 'leverage' of a 20% down loan would still be ~4.8:1.

[Dylan16807]

What you're skipping in this equation is that the amount of leverage drops every month when you make your payment. The average leverage is a lot lower than the starting leverage. That's what makes a mortgage pretty different from a leveraged trade.

> Unless you're spending well beyond your means (which, admittedly, some people do), then paying interest on a mortgage payment should mean making much much more elsewhere by investing money you would have spent on buying a house in cash.

There's no free lunch. Often, investments will get you a better return than your interest fees. Often they won't. And "much much more" is downright wrong.

[Kirby64]

In today's 7% interest rates, yeah it's potentially a wash. In the era of 3-4% rates, it's free money. 'much much more' is absolutely correct at 3-4%, which a lot of people currently have mortgages at today.