"DSK" wrote in message
...
NOYB wrote:
Here's another way to look at it:

Suppose you live in a million dollar home, but have zero equity in that
home (ie--you owe 1 million dollars). In 30 years, that home is worth $4
million, and you owe still owe $1 million on it (ie--you had an
interest-only loan). You have $3 million in equity on the home. You
decide to take out $2 million of that equity, and put it in an investment
that pays a rate equal to what the monthly payment would be on the loan
(ie--you end up with a net monthly outlay of cash of zero). You can then
use the $2 million to live on.

The problem here is that you've already made payments on that
interest-only loan that far far exceed your imaginary equity.

Nope. Try again. An interest-only loan on $1 million at 6% interest gives
you a monthly payment of $5000. Over 30 years, those payments total $1.8
million. If you have $3 million in equity in the place at the end of 30
years, and only spent $1.8 million in payments, you're $1.2 million ahead of
the game...and you essentially lived for free for all of those years. Even
if you include taxes and insurance, you still lived for free.

Your monthly payments over all of those years essentially equates to a
forced savings plan.






Untill you sell it an pocket the cash, equity is nothing but a bubble.
just like the stock market.

BTW back in the late 1990s, there were plenty of articles in newspapers &
investment magazines about how the stock market could never possibly go
down.

That's BS. A company could go out of business or bankrupt (Enron, WorldCom,
etc), forcing the premature liquidation of that asset at a loss. Property
is always there. I have 28 years before I plan on retiring. Any possible
correction in the market will have more than re-corrected itself by then.