Has anyone ever heard of this investment philosophy before? It’s kind of weird, IMO.?
Believe it or not, until the recession began in 2008 I had never really heard of this before, but supposedly a lot of people follow this philosophy.
Apparently, back before the financial crisis, many economists told people that it was a bad idea to pay off their mortgage and that they should constantly be refinancing and borrowing against their house. They said that mortgages are good debt and that you could deduct a portion of the interest on the home loan. Both of which are true.
However, I don’t understand the logic behind that. Why would I want to be in perpetual debt to a bank? And yeah, you can deduct some of the interest off of your taxes, but that doesn’t beat not paying interest at all.
Maybe it’s just me, but I don’t like debt…. any debt. I pay off my debts as quickly as possible because I don’t believe in paying interest to a bank. Every time I have to pay interest to a bank I think to myself “That’s XXX dollars I just gave away for the ability to be in debt”. I pay off my credit cards in full every single month.
IDK, what do you think about this logic? Is it good? Is it bad?
There are a lot of people who I work with who are regretting this decision now. I bought a penthouse 6 years ago and I had it paid off in 5 years (on a 30 year mortgage). And when the economic crisis hit and I lost my job, I didn’t have to worry about making mortgage payments, just paying the taxes.