Ever wondered why rich people keep getting richer? Here is the perfect example of why
Published in · 6 min read · Oct 29, 2023
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It’s really common for rich people to take out mortgages for the homes they buy, even though they could easily pay for them outright. The question is, why do they do this?
The simple answer is, it’s profitable to do so.
To explain why, imagine you decide to buy a home worth 10 million. You’ve got 20 million in the bank, and so if you wanted you could pay for it outright. But you decide you’re going to take out a mortgage, and so you go to the bank and ask for one.
The first thing the bank is going to do is deem you a safe bet, the safest of safe bets. As a result, they are going to offer you a ridiculously good interest rate. This interest rate will probably be so good that over the course of the mortgage, you will pay a rate that will be below the rate of inflation.
