From hliu at mindspring.com Thu May 27 14:29:29 1999
Not only that; the income from alternative investment is
subject to income tax, so it becomes a wash with mortgage
interest deduction for tax purposes.
"Henry C.K. Liu" is right (for once?) that the tax advantage of a mortgage is moot in this calculation: the taxable gains from the alternate investment wipe them out. The proper equation to solve is whether the alternate investment beats the interest rate you pay on your loan. This is the fundamantal question of performance: is the fucking you get worth the fucking you give.
hocking one's home in order to participate in speculation ranks
near using alcohol to boost confidence.
This is, of course, your opinion -- not a provable fact. Don't forget that the purchase of your housing is in fact speculation as well: you're speculating that owning is better than renting. It might be, but if real estate crashes, you'll wish you were a renter.
In addition, it appears to me that you're ignoring things like utility of housing, appetite for risk, and long term goals. "Hocking one's home" is no different, structurally or financially, than hocking one's stocks. If you can survive the loss, and the return beats not doing it, and your goal is capital appreciation, then it's nothing at all like using alcohol to boost confidence. The real question you need to ask (and Greg does ask this) is: can you beat the bank? These days, with mortgage rates far below broker call rates available to single-homeowner retail folks, borrowing against your home is a better deal than sitting on equity.
Don't get me wrong: I'm not saying the opposite of you. I'm not saying that it's the best idea. I'm just saying that your naysaying is too general, naive, and, well, wrong.
/jordan