Is There A Benefit To Not Being Mortgage Free?

samatron

I am the family friend of a wealthy patriarch. We had a good money talk one time, and he told me that counter-intuitively, the best strategy for long-term wealth was to borrow as much as you can for as long as you can, and to downsize at the end of one's career. This goes completely against the logic of being mortgage free. He is testament to the principle, with an impressive portfolio of properties, and a family that he has been able to greatly financially support.
Since I last wrote in this forum, my mortgage exposure has gone up from £80k to around £300k, but I feel a LOT better off. The passive income I generate is a lot more than if I had paid off my mortgage. Is this a crackpot idea?

saucer

I suspect you will not have many people agreeing with that logic in the 'MFW' forum, but look over on the Pension's forum and you will see that your friend's logic is widely shared.

When interest rates are as low as they are you will not struggle to find investments, property or otherwise, that will outperform them. The risk of course is that you are living with a lot of debt.
For my part, I am paying a very significant amount into my pensions (both defined benefit and defined contribution) where I get higher rate tax relief, paying the interest on my mortage that I am planning to pay-off using part of my pension saving. As and when interest rates rise I will review this, but I have budgetted for interest rate rises, and we have a healthy level of equity. There are of course always risks though

bexster1975

Hello

I belive the difference here is likely to be motive. I cannot speak for other MFers, but I didn't clear my mortgage to be wealthy, I cleared to have the freedom to stop being a rat in the rat race. And that is what it has done. It's about freedom and security for me. I now work exactly the amount I want to. For myself and the passive income too.

Bexster