With 30-year rates around 6% right now, the math becomes a lot tighter as well. Where are you going to find 6%+ investments right now?
If you invest on top of that and get some small decent return you come out even more on top.
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.
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.
Some index funds though might beat your mortgage rate anyway, so it’s even better.
A $300,000 home with a 20% down payment and 80% borrowed at 5.0%* will cost you __$523,813.88__ over the 30 year life of the loan.
Logically, cash just sitting in the bank 1% or less in interest should go towards your loan costing more than 1% or towards avoiding $5k-$8k of closing costs on a mortgage.
*Today’s interest rates are 5.125% for a 30 yr fixed rate mortgage.
Ignoring income taxes, paying $10k down on a 5% mortgage with 25 years remaining is the same as purchasing a $10k bond at 5% that matures in 25 years.
One downside, is that pre-paying your mortgage doesn't change the cash-flow immediately, it just changes the end date of the mortgage.
So the invest/pay off home trade-off is there for everyone. Even for people like doctors, whose investments might not necessary be market-based.
