[_heimdall]

The standard recommendation of taking out sent so you can invest your money and "make it work for you" frustrates me to no end.

Yes, on paper I can accrue more wealth if I mortgage my house and invest that same amount elsewhere. No, I would not trade owning a house outright for having a house that will be taken from me if I can no longer pay, strict insurance requirements, and a pile of someone else's debt that I call money and ignore the risk implied in investing in someone else's gamble.

[supertrope]

I don't think gp comment is advocating doing a cash out re-finance, but to exploit leverage when first financing the purchase.

I used to be very debt averse. Owing a six figure sum seemed like a huge burden. Now I understand that mortgagees are non-callable. If you put 20% down that removes a lot of risk of being underwater. Fannie Mae is eating inflation risk for you. It's a way of smoothing expenses over multiple life stages. With a 30 year mortgage you can get a smaller payment when you're younger, earning less, and paying for daycare. When you're older you're earning more, might be an empty nester, and inflation has made each payment easier. By not rushing to pay off low interest debt you've effectively transferred money from 50 year old you to 30 year old you.

If you stayed employed, locked in a 3% mortgage, and contributed to your 401k, you won the wealth re-distribution game of 2020-2022.

[_heimdall]

Respectfully, you're effectively describing the argument I take issue with.

> Now I understand that mortgagees are non-callable.

How are you defining non-callable? If you stop paying on your mortgage that sent will eventually be called and you will be kicked out.

> If you put 20% down that removes a lot of risk of being underwater

That removes the risk of being underwater for any market correction sub-20%. Real estate prices in any areas have grown more than that ovwr the last few years, the risk of a 20%+ correction is on the table.

> With a 30 year mortgage you can get a smaller payment

And a 40 year loan would be even smaller. Where do we draw the line, and why? 30 year loans weren't always the norm, you don't have to go too far back to find an average mortgage on 10 or 15 year loans.

> When you're older you're earning more, might be an empty nester, and inflation has made each payment easier.

Income doesn't always move up, and inflation only makes payment easier if you (a) secured a fixed rate loan and (b) stay in the same home long term.

> By not rushing to pay off low interest debt you've effectively transferred money from 50 year old you to 30 year old you.

Or if it doesn't work out, 30 year old you has a home at the expense of 35 year old you.

> If you stayed employed

That's a big if, and you not only need to stay employed, you need wages to at least keep up with true inflation. Your 401k won't matter until you are at an age where you can withdraw, or we have another pandemic-style response where we allow people to cash in 401ks without the early withdrawal fees.

[itake]

The people in the camp of payoff early often highlight the emotional safety of paying off the debt…

But that logic never made sense to me, because homes are always callable: if you stop paying property taxes, Thats not your house any more.

If house burns down, Thats not your house any more.

Safety comes from optimizing your wealth for size and liquidity.

The person that kept things liquid, leveraged into the stock market 401k etc will be much better in a catastrophic event (job loss, flood, etc) than the person that has less liquid assets and a property tax payment due.

[Esophagus4]

I agree - I think it’s bad advice. And cars make even less sense than houses, which should hopefully appreciate in the long run. People think of car loans like “free money” if I can buy a car on credit and pocket the spread between my investments and my APR.

The problem is:

1) that encourages you to buy more car (and lose more money in depreciation and fees) than you would if you just paid cash for a cheaper car

2) there’s no guarantee you can beat your APR in the short run (to beat your APR you almost always have to move out on the risk frontier… T bills are not doing it)

I view it as: if capturing that marginal spread of whatever% is important to you, you are spending too much money and you’re probably taking your eye off a bigger loss you’re taking by spending all that.