By Robert Mattei:
In general I avoid debt. I had one car loan in my life, for my first car, and I borrowed that money from my dad. I pay my credit cards in full every month. I paid off my one and only mortgage in seven years. So writing this article goes against my grain. However, if you believe that today’s low interest rates and inflation rates will revert to the mean, then having a mortgage may work in your favor.
In this article we compare two hypothetical retirees. Retiree one has the following Assets and liabilities:
Investments excluding his home: 950,000
Home: 300,000
Mortgage: -250,000
Net worth 1,000,000
Retiree one has a fixed rate 15-year mortgage with an interest rate of 3.3%.
Retiree two’s Assets and Liabilities:
Investments excluding his home: 700,000
Home: 300,000
Net worth 1,000,000
In the first test, each retiree is 100% invested in the S&P 500. For
