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I didn't say that rich people don't have mortgages, but that that they wouldn't borrow against their house to finance purchases. There may be some tax advantage
by pg 18y ago
I didn't say that rich people don't have mortgages, but that that they wouldn't borrow against their house to finance purchases. There may be some tax advantage to having a mortgage, but it wouldn't make sense to borrow against one's house to buy stuff that was going to depreciate in value.
Where did you hear that Bill Gates has a mortgage on his house? It seems very unlikely. You can only deduct the interest on the first million of mortgage debt, so it wouldn't seem worth the trouble.
As for the handbag question, try giving a woman the choice of buying a new handbag or renting a used one, and see what she says.
- ivankirigin 18y agoOn the last point, the same applies for cars. The market for used 1 or 2 year old BMWs is very strong. Rich people buy new ones, and dump slightly used ones.
- linhir 18y agoYa, I would agree with your comment about financing purchases, and I read that slightly incorrectly. My point, even for bill gates, is that if your rate of return on capital, or expected rate of return, is higher than the rate at which you can borrow capital, than you should borrow. That differential is what's important, with the tax break being icing on the cake. And on the handbag question, haha, I think you're likely correct. I am less sure about cars, since if you are going to buy and dump a car, it seems like you should lease it, no? I don't know... I think the other important thing to realize is that the rich aren't, like any large group, unified in their behavior, which is something that article like this always avoid. There is no one way to become a millionaire and there certainly isn't one set of behaviors they exhibit.