I have been much more active on social media in the last few years.
And one of my observations is that everyone is looking to become viral with some controversial roof that flows feathers.
You are essentially rewarded for triggering a healthy (or perhaps unhealthy) conversation, so that is often the goal.
A recent tweet I encountered said, “If you have a mortgage loan, you’re not rich.”
Obviously, this is challenging people to argue. But is that actually true? Or have lots of rich people even priority loans?
Rich people love mortgage loans
Without getting to the weeds of this one, as it is a pretty silly roof for me, I would argue that more rich people than “not rich people” have priority loans.
In other words, it is more likely that you have a mortgage loan if you are wealthy.
Allow me to explain. For starters, it is more likely that wealthy people are homeowners than tenants.
And if you are a homeowner, the chances of you have a mortgage loan are not a reality to buy a home-rate.
Even if possible, the ultra-welfare still does not want to sink much of the cash into an illuminous asset as a sole housing.
Why? Because the chances are that they can make more of their money elsewhere. Real estate is probably not the best investment they can make, but it is definitely a good one. And they also get to live in it!
The rich know that it is better to put your money to work for you than actually working.
Just ask Warren Buffett, who famously said in 2013 that “Today is the day to get a mortgage loan.”
What he meant by it was mortgage debt is a good debt, and with rates at all times during this period it was an incredible time to get one.
Good, cheap debt you can hold for decades
He added that it was also worth lasting for a long time, also called 30 years in the case of a 30-year-old fixed.
So those who say to buy only a home if you can afford a 15-year-old firm, like Dave Ramsey, may play a small ball.
While people avoid debt and say to pay the loan as soon as possible, Buffett said the opposite.
The last time I checked he is pretty rich. Maybe not the richest person in the world anymore, but the top-10 in the world easy. He doesn’t hurt.
For the record, he also took a 30-year fixed mortgage back in the 1970s on a property in Laguna Beach, and from 2017 it still had.
At that time, he joked that it was the only home loan he had “for 50 years”, a nod to him who probably refinanced the loan at some point.
But takeaway is ready; He took out priority loans even when he didn’t need it, and he didn’t pay them in front of the plan even though he could.
Buffett is not alone either. Look at Mark Zuckerberg’s mortgage loan (#3 on the billionaire list) or Beyoncé and Jay-Z’s $ 50m+ mortgage.
Long story short, the rich love loans, because they are cheap forms of debt with excellent terms (compared to other loans) that are easy to get!
[Renting vs. buying a home: 55 pros and cons to consider]
If you don’t have a mortgage loan you might be a tenant
Now let’s consider the other side of the story. The individual without a mortgage.
Yes, it may be a homeowner who paid their mortgage loan, which is a wonderful achievement and nothing to sneeze at.
Especially if they are close to or in retirement and do not want another responsibility to hang over the head.
But a mortgage -loan -free person is probably more likely to be a tenant, someone without ownership of the property they live in.
So to the original statement that if you have a mortgage loan you don’t call, I call BS.
Especially since we know that homeowners have much more wealth than tenants.
According to the Federal Reserve, the median wealth between homeowners and tenants was almost $ 390,000 from 2022, and the average wealth was over $ 1,370,000.
This is partly due to the fact that wealthy people have the means to buy real estate. But this is also because real estate generates a huge wealth.
In other words, taking a mortgage loan is a great way to get rich.
Just make sure you can afford the monthly payment for the foreseeable future and have the way to keep the property for the long distance.
If you do, you will probably be nicely rewarded even if you have a mortgage loan. Oh, and that mortgage loan means you can free up cash for other investments suitable for better diversification.
Read on: Do I own my home if I have a mortgage loan?
Before creating this site, I worked as a banking director of a wholesale loan in Los Angeles. My practical experience in the early 2000s inspired me to start writing about mortgage loans 19 years ago to help potential (and existing) home buyers better navigate the home loan process. Follow me on x for hot take.