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Comment by jandrewrogers | Hacker News Reader

> By most estimates, only about 10-20% of US households are debt-free.

This needs to be qualified with the fact that it doesn't make sense for many people to be debt-free if they are financially literate. I know many people, myself included, who carry debt they could easily pay off because it would be irrational to do so. Being debt-free would actually make them poorer.

This often holds true even when ignoring obvious cases like debt interest well below the Treasury rates.

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being debt assumes appreciation on the asset you are holding under that debt which has been artificially inflated by the governments for yeeeeears now. you would never hold a debt on the house (even at 3.5%) if the house stayed the same price the day of the purchase and date of the sale. too many people are saying “some debt is good/great” which is only marginally true if you make certain assumptions which is exactly what they are - assumptions.

> being debt assumes appreciation on the asset

No it doesn't. The math works out the same regardless of changes in asset value. Paying cash has significant opportunity and liquidity costs. These can often exceed the cost of debt.

I had mortage on a condo for $460k. total money paid to pay it off via debt, little over $1m. I sell 30 years later for $460k I just lost $550k :) (I didn’t, paid it off in 5 years saving myself 100’s of thousands …)

ask yourself why “we” think that some debt (e.g. real estate) is great) while others (e.g. vehicle) is bad? it just might ge that one is looked at as appreciating asset while the other not so much.

comments like yours always remind of the stripper scene from the movie “big short”

having debt also makes you a forever slave (true capitalism at work). God forbid you lose your source(s) of income and don’t have FU money or significant stash, now you fucked. with no debt and roof over your head life is infinitely better even during trying times..

You aren't making a consistent or coherent argument. The math of e.g. interest rate arbitrage doesn't care whether you are buying a house or a car, you will profit the same regardless.

In many cases the risk is literally zero, the scenarios you are imagining where it has bad consequences don't exist as a real thing that can happen. If you have enough money to pay cash then you also have enough money to pay off the equivalent debt at any time of your convenience.

Many people believe many things that are not based in physical reality. Many popular beliefs about debt are no different and debt has no intrinsic moral significance.

> In many cases the risk is literally zero...

I presume this is hyperbole and that what you mean is almost or very near zero.

Let's say that each month I have an extra $1000. Should I use that money to pay down a 4% mortgage, or should I invest it in an index fund that is all but guaranteed to earn more than that?

> that is all but guaranteed to earn more than that?

say SP500 nominal avg is around 10% - no brainer, yes? but that is an avg of many 30-year windows. some 30-year windows might not be that kind to you. market crash in say first 5-6 years will hurt you a lot

so there is just no certainty here except we think (just like we expect appreciation on the house) we’ll end up on the “right” side of this.

and of course not to mention the most obvious, roughly 99.56% of people will not be investing this money to get more than 4%…

Even if the house prices stayed the same, it would make sense to keep the low interest debt and invest in other assets that have higher yield, like shares.

this again assumes a lot… it assumes that you can make up the money you are donating to lenders with some ficticious higher yield investments. I’d ballpark less that 5% of people would make out on the positive side of this.

Depends on what "debt-free" means here: "not carrying any debt" vs "positive net worth" are different situations.

We are debt-free, but it's because I paid off a mortgage the hard way, and then sold that house to buy another.

*Cries in paid off 3.25% mortgage...

Minmaxxing your finances is maladaptive frugality. You have something even better than 1% extra interest in your account: you have no mortgage. You can do whatever the fuck you want to your house and your bank doesn't stick its nose in your business to ensure the value of the house stays up. You can do whatever the fuck you want with your career and you don't have to worry the bank will come and take your house back.

When does an existing mortgage lender get involved in a house remodel? (assuming you’re not trying to borrow more money for it)

I’ve owned houses for 30 years and no bank has gotten review of contemplated projects or anything other than appraisals during origination of a mortgage or refinance (which are entirely optional for me, of course).

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