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But if the situation is that in 2022, you have enough cash to buy a house outright or get a mortgage and invest your cash, you still do have to invest your cash

But if the situation is that in 2022, you have enough cash to buy a house outright or get a mortgage and invest your cash, you still do have to invest your cash to benefit from the mortgage. If I have $300k in cash today, and I want to buy a $300k house, then I can get a mortgage and let inflation shrink my mortgage payments, but it's also shrinking the $300k I have in cash. I don't see how you can profit from the mortgage unless you find an investment for your cash with yields significantly higher than your mortgage interest rate.

foobarian 5y ago
Index fund: VOO, FXAIX, etc.
xwdv 5y ago
You don’t need to really beat your mortgage rate, you just need to beat the inflation rate which is easier. As your income adjusts to inflation overtime, your mortgage becomes easier and easier to pay off and makes up a smaller percent of your expenses. Some index funds though might beat your mortgage rate anyway, so it’s even better.
Raidion 5y ago
This makes a lot of assumptions about interest rates, but it holds up. Buy a house (with mortgage) for 4%. Inflation is 5% a year. Invest the money in real assets (literally anything diversified). Your mortgage price goes down in future dollars because of the delta between interest rates and inflation. Even if inflation isn't happening, mortgage rates tend to be fairly low risk, so any diversified bucket of assets has a historical return greater than the mortgage rate, especially over a 30 year period. If you bought a 13% mortgage in 1984 (highest), in 30 years, S&P returns 11% by 2014, so even if you never refinance, during the highest interest rates you're only down 2%. If you refinance at basically any time in the 90s/00s you're way ahead.
- bombcar 5y ago
  The real takeaway is that the outside factors are going to weigh much more than interest rates vs buy vs etc. If you buy during amazingly low rates, you'll feel happy when the rates shoot up (and maybe sad if you look at Zillow, but if you're not moving who cares?) - and if you buy during rising rates you'll be glad you got in when you did, and if you buy at the peak, well, you can refinance later.

foobarian 5y ago

Index fund: VOO, FXAIX, etc.

xwdv 5y ago

You don’t need to really beat your mortgage rate, you just need to beat the inflation rate which is easier. As your income adjusts to inflation overtime, your mortgage becomes easier and easier to pay off and makes up a smaller percent of your expenses. Some index funds though might beat your mortgage rate anyway, so it’s even better.

Raidion 5y ago

This makes a lot of assumptions about interest rates, but it holds up. Buy a house (with mortgage) for 4%. Inflation is 5% a year. Invest the money in real assets (literally anything diversified). Your mortgage price goes down in future dollars because of the delta between interest rates and inflation. Even if inflation isn't happening, mortgage rates tend to be fairly low risk, so any diversified bucket of assets has a historical return greater than the mortgage rate, especially over a 30 year period. If you bought a 13% mortgage in 1984 (highest), in 30 years, S&P returns 11% by 2014, so even if you never refinance, during the highest interest rates you're only down 2%. If you refinance at basically any time in the 90s/00s you're way ahead.

bombcar 5y ago
The real takeaway is that the outside factors are going to weigh much more than interest rates vs buy vs etc. If you buy during amazingly low rates, you'll feel happy when the rates shoot up (and maybe sad if you look at Zillow, but if you're not moving who cares?) - and if you buy during rising rates you'll be glad you got in when you did, and if you buy at the peak, well, you can refinance later.