Quote:
|
Originally Posted by Hootie
No one buys a house in cash...that's just reeruned. Makes NO sense.
|
I might not call it "reeruned", but in general I agree if the person applying for the mortgage can get a decent rate.
Debt is not evil, it is a useful tool just like a knife is a useful tool. You can cut yourself badly with a knife, but that doesnt mean we should ban all knives.
If you are in a high tax bracket and could get... oh, lets say 5.5%, then that loan is actually costing you about 4 1/8%. If you cant beat that through investments theres something wrong with you.
I have a student loan at some silly low interest rate of 3 1/8%. After the tax deduction it only costs me a little under 2.5%. I have a payment plan on it stretching out to the next 20 years, but I'd be an idiot to pay that off 1 second early. I dont know which idiot thought it was a good idea to give me this cheap money, but I intend to take advantage of them.
On the other hand, if your talking about a non-deductible 6% car loan, or if your credit sucks and you can only get a 7-8% mortgage, thats starting to get expensive enough that you cant reliably make very much money on the spread safely, so it makes sense to pay it off or not take out the loan at all and pay cash.