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It absolutely is savings. Compare two people: Person #1 - Makes $6000/month - Has an interest-only mortgage payment of $1000/month (yes it's still possible to

It absolutely is savings. Compare two people: Person #1 - Makes $6000/month - Has an interest-only mortgage payment of $1000/month (yes it's still possible to get interest-only mortgages) - All other expenses are $4000/month - Puts $1000/month in a savings account Person #2 - Makes $6000/month - Has a mortgage payment of $1000 interest + $1000 principal = $2000/month - All other expenses are $4000/month Person #1 and #2 are saving the exact same amount of money. Over time if nothing changes Person #2 will actually be saving more, because the interest portion of the mortgage payment will decrease and the principal portion will increase.

shiftpgdn 7y ago
Can you give more details on the interest only mortgages? I haven't seen that offered anywhere.
- ralph84 7y ago
  You need a portfolio lender since the GSEs won't buy an interest-only mortgage. Union Bank, Navy Federal, and SoFi are some examples.
bluGill 7y ago
This isn't right. Over time Person #1 should have more savings. Loan interest rates are very low, person #1 shouldn't be putting the money into a savings account, he should be using a better investment. Person #2 is now forgoing the higher return of stocks to pay off the mortgage. It gets worse for person #2. The house is probably changing in value. If the house goes up in value person #1 is ahead because that money is all his, on the $10k investment, person #2 has a much larger investment to get the same return. If the house goes down person #1 has at most $10k to lose, while person #2 can lose the entire value he has paid in so far. Of course eventually person #2 has the house paid off and has $2000 to work with.
- ralph84 7y ago
  What does any of what you wrote have to do with whether or not it's savings. You're just saying you think some forms of savings are better than others.
  - bluGill 7y ago
    I'm responding to the last sentience where you says person #2 was better because he was paying off the mortgage.
    - ralph84 7y ago
      I didn't say #2 was better, I said he was saving more. It's certainly possible to design any number of scenarios where someone who saves more ends up with less in the end.
dagw 7y ago
The caviates here are a finite time horizon, whether or not you ever plan on selling your house and whether or not you care about what sort of inheritance you want to leave. If person #1 and #2 both live in their houses until they die and don't have anybody they want to leave their money to then it depends on how many years there are between #2 pays off his loan and when he dies (since from your perspective all your loans are cancelled when you die)
- imtringued 7y ago
  They still benefit from fixed prices while rent can keep going up.
MuffinFlavored 7y ago
> interest-only mortgage Why would anybody ever do this?
- dagw 7y ago
  If your interest is 2% and you believe you can get 4% from some other investment, then some people might ask themselves why 'invest' in paying off your mortgage?
IanCal 7y ago
I think people are really missing their point. You show the change in net worth, but they're saying that they see savings as different and I get what they mean. Person 2 in your example has the same net worth but not the same access to the money. If a sudden bill comes in then being $2k lower in my debt vs $2k in a savings account are functionally very different. That's not to say one is right or wrong, but they are different.

shiftpgdn 7y ago

Can you give more details on the interest only mortgages? I haven't seen that offered anywhere.

ralph84 7y ago
You need a portfolio lender since the GSEs won't buy an interest-only mortgage. Union Bank, Navy Federal, and SoFi are some examples.

bluGill 7y ago

This isn't right. Over time Person #1 should have more savings. Loan interest rates are very low, person #1 shouldn't be putting the money into a savings account, he should be using a better investment. Person #2 is now forgoing the higher return of stocks to pay off the mortgage. It gets worse for person #2. The house is probably changing in value. If the house goes up in value person #1 is ahead because that money is all his, on the $10k investment, person #2 has a much larger investment to get the same return. If the house goes down person #1 has at most $10k to lose, while person #2 can lose the entire value he has paid in so far. Of course eventually person #2 has the house paid off and has $2000 to work with.

ralph84 7y ago
What does any of what you wrote have to do with whether or not it's savings. You're just saying you think some forms of savings are better than others.
- bluGill 7y ago
  I'm responding to the last sentience where you says person #2 was better because he was paying off the mortgage.
  - ralph84 7y ago
    I didn't say #2 was better, I said he was saving more. It's certainly possible to design any number of scenarios where someone who saves more ends up with less in the end.

dagw 7y ago

The caviates here are a finite time horizon, whether or not you ever plan on selling your house and whether or not you care about what sort of inheritance you want to leave. If person #1 and #2 both live in their houses until they die and don't have anybody they want to leave their money to then it depends on how many years there are between #2 pays off his loan and when he dies (since from your perspective all your loans are cancelled when you die)

imtringued 7y ago
They still benefit from fixed prices while rent can keep going up.

MuffinFlavored 7y ago

> interest-only mortgage Why would anybody ever do this?

dagw 7y ago
If your interest is 2% and you believe you can get 4% from some other investment, then some people might ask themselves why 'invest' in paying off your mortgage?

IanCal 7y ago

I think people are really missing their point. You show the change in net worth, but they're saying that they see savings as different and I get what they mean. Person 2 in your example has the same net worth but not the same access to the money. If a sudden bill comes in then being $2k lower in my debt vs $2k in a savings account are functionally very different. That's not to say one is right or wrong, but they are different.