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Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127815  
Subject: Re: Should I pay cash or get a mortgage? Date: 3/3/2013 4:03 PM
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Hi Rich,

Doing a brief scan of the comments in this thread that was my thought. My belief is that the average person (which geneally isn't the person reading these boards) produces below average (SP500) returns.
Its an excellent point. 'Average' is neither the typical audience here, nor the desired outcome of anyone who shows up here (even if they have previously been merely average, or worse.)

Giving a person $250K to invest instead of having a house paid off IMO is usually a recipe for disaster. Unless the typical person can take that money and get something safe like a CD/annuity which is paying more than a mortgage rate I just think for a significant majority of people they will obtain returns lower than their mortgage in the long run.
With a 20-30 year timeframe, there *ARE* fixed rate, and upside indexed rate instruments from the cash value insurance world that pretty strongly (and completely hands-free/passively) outperform the costs of carrying a mortgage balance. No need for an individual to try to personally play the markets. A typical ratio is 5-8% post tax growth, net of all costs & fees, versus 1.5-3% post tax mortgage costs.

OTOH, those who *ARE* sufficiently educated & skilled in market trading (like RayVT, as an example) can probably beat the costs of their mortgage by 200-400% or even substantially more.

I don't think there is one answer for everyone. It really depends on the persons investing skills.
Actually, not really so much a persons individual skills as much as their knowledge of what's actually available in the hands-off safe growth options... *AND* probably even more importantly; their ability to have their reason and logic override their emotions (if they're a nervous type of person.)

Dave Donhoff
Leverage Planner
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