Not borrowing money is bad advice. The best way to become rich is leveraged investment. A mortgage is simply a 5X leveraged investment in real estate. With interest rates around 3% on a 30-year fixed, tax deductible, you’re actually winding up borrowing at below inflation. Then you’re building principal too, yours and not your landlords. I wish I’d realized this sooner.

When you’re young you could even consider borrowing money to invest in the stock markets. Imagine if you’d borrowed $100K in 2010 and dropped it all into the S&P. You’d have $333K right now. If you’d done it in 1995 you’d have $650K. When you’re young it matters far less if you get wiped out, you’ve got years to recover.

If these investments of yours were as much of a sure bet (or adequately sure bet) as you're suggesting, banks would simply cut out the middle-person (i.e. the borrower) and invest in these things directly.

I think banks make their money not on interest rates but on various fees and overheads: each person getting a mortgage pays 10K (or more) to the bank right away. That is huge upfront money in addition to the interest rate.

Same with late fees etc. Huge business.

also folks on average refinance or sell their property every 10 years meaning folks on a 30 year restart, paying new origination fees and once more the bulk of their payments are interest.

Why would they? For the longest time retail banks weren’t allowed to, and investment banks get risk free money via management and brokerage fees. All investing returns involve risk, it depends on your time horizon.

Like I said borrowing for business is a bit different, so yes you can borrow to invest.

However, a personal 30-year loan if you have nothing else but a mediocre salary may not be such a great idea. Essentially you will be tied to one place for up to 30 years or less if you are lucky.

Not really, for 3-4 years maybe, at that point you’d break even on a resale taking into account broker fees. At that point you could always rent it out, too, yielding potentially free cash flow.

I would strongly caution against this sort of mindset.

Renting is not nearly as pain-free and simple experience as you make it sound. All it takes one bad tenant, longer vacancy, or an expensive home repair to you set back for a decade.

Nor is home appreciation a sure thing. Selling a home costs 6% + closing fees which run at least another 2%. Home taxes are often quite a burden typically add another 1% cost per year and say 3% paid as interest. Factor in all the costs, selling 3-4 years later you are barely breaking even, do the math, you'd have to sell for 6% + 4% + 6% + 3% you would need a 18% appreciation just to break even!!! Of course, most people are bad at keeping track of all their costs and will only tell you about the awesome deal they made: Look Ma, I sold three years later for 15% more - yet overall they lost money on it.

Have you heard of the rule of 1%? It is widely considered the benchmark to renting, you got to rent for least at 1% of the total cost you are paying. And you're real income, that you can assign to the mortgage will be more like 0.5% of the rental. Very few homes in America are even close to that. Then being a landlord is a job as well. You're not just sitting back having money coming as "free cashflow", there are always things that need to be dealt with - many times with expenses.

Hoping to break even after 3-4 years is incredibly naive. Yes there are people that luck out, but then so is playing the lottery, there are many more that don't. More likely 10 years when you get to see a real return if all goes well. had you invested that, you would be far ahead.

Are you advising people to take out a loan and dump it in the stock market?

I mean I’m not saying you should go get a high interest loan that would force you into bankruptcy and drop it into SPY and hope for the best, but sure, if you have access to cheap capital and a huge runway to recover.

For instance you can take out a mortgage and then instead of paying it off as fast as you can, investing your free cash flow. That’s the same thing, but when presented that way it seems far less offensive.

You can margin trade for pretty cheap.

2.55% at InteractiveBrokers

> With interest rates around 3% on a 30-year fixed,

3.51% this week, and that's a recent low, so “around 3%” is a stretch.

> tax deductible, you’re actually winding up borrowing at below inflation.

If you assume inflation will soon return to 1990s or earlier levels, maybe; US inflation has been under 2.5% for all but 5 years since 2000, and averaging even lower; you have to be in a pretty high tax bracket for even 3% to get close to breaking even with inflation at those rates, and actual rates are above 3%.

Fair but let’s be very conservative and say 2% inflation and no tax deduction. You’re paying a net of 1.5% for that loan. That’s practically free money no matter how you slice it. You could basically offset it by keeping the cash in a savings account. If you can’t manage to beat 1% ARR you probably should just pay that mortgage off lol

Avoid credit card and other interest debt yes. But a blanket ban on mortgage debt is foolish. Sometimes it makes more sense to buy and sometimes to rent; there are multiple factors to consider to determine which is better. But there's nothing wrong with a mortgage when buying within one's means and when buying makes sense. (IE reasonable price to rent ratio, no plans to move for say 5+ years, etc.)