You made money before taking the loan, as your property increased in value. Taking a loan is a way of realizing the profit, but you can of course also sell your real estate.

The money is paid back during the course of decades, when that money will be worth 1/4, 1/3 or half to what it is worth now. And your real estate is ripe to be mortgaged again for another jackpot payout.

Hundreds of millions of people all over the world do it, and tax authorities applaud it. Who do you think writes the tax code?

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mytailorisrich 6 days ago | parent | next [-]

> You made money before taking the loan, as your property increased in value. Taking a loan is a way of realizing the profit, but you can of course also sell your real estate.

That's incorrect on both counts. You did not make money and the loan is not a way to realize the profit since you have to pay it back, as explained before.

I think this illustrates that finance and accounting are very poorly understood topic and are easily used for sensationalism.

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carlosjobim 6 days ago | parent [-]

There's nothing sensational about it, and I'm disappointed that you cannot see this thing for what it is. Ask people among your relatives who own real estate and you will realize that a lot of them mortgaged their real estate to pay for new cars, vacations, investment in a business, kid's education.

The money is paid back over a long period of time, while the currency depreciates in value and the real estate appreciates in value. The amount of people who have made a fortune through real estate appreciation probably outnumber by a factor of 10 to 1 the amount of people who made a fortune by business or a working career.

If I purchase shares in a company and then sit and do nothing, and the valuation increases by 10 times, then have I made money or not? I can sell the shares or I can mortgage the shares by borrowing against their value. Should that value increase be taxed?

If I purchase real estate and then sit and do nothing, and the valuation increases by 10 times, then have I made money or not? I can sell the real estate or I can mortgage it and borrow against its value. Should that value increase be taxed?

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mytailorisrich 6 days ago | parent [-]

> I can sell the real estate or I can mortgage it and borrow against its value

You make money if you sell. You don't if you use the asset as security for a loan.

This has been explained several times.

A loan is a loan, whether it is a secured loan or not. A mortgage is a secured loan whose security is real property.

You are effectively claiming that getting a loan is making money. Obviously you do not see that this is clearly not the case when thinking about it through a mortgage, but would you make the same claim with credit cards or a personal loan to buy a car, or a secured loan against, say, your car? My guess is that you wouldn't although it is the same thing as getting a mortgage.

	▲	carlosjobim 5 days ago \| parent [-]
		Instead of repeating myself, let me hear your side of the argument. If my property increased 9 times in value and I can: A) Sell it and get that money right now, or B) Mortgage it and get all or part of that money right now, then pay it back in the future. By what kind of logic have you not made money from the value increase? > You are effectively claiming that getting a loan is making money. No, I said that you made the money when the value increased. Your ability to take a loan against it is the evidence that the value in fact increased. I never said anything else.

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seabass-labrax 6 days ago | parent | prev [-]

If your mortgaged house depreciates while you are still paying off the mortgage, you still need to pay the original, un-depreciated amount. You'll also probably need to pay interest accumulated during the time the property was mortgaged, which means you can't use it to avoid inflation.

What lender do you know of who will voluntarily reduce your mortgage obligation if the property depreciates?

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carlosjobim 6 days ago | parent [-]

> If your mortgaged house depreciates while you are still paying off the mortgage, you still need to pay the original, un-depreciated amount.

Mistake in logic. The money you received as a loan doesn't depreciate in value if the underlying asset depreciates in value. And vice versa.

As for interest, if your real estate has appreciated by a factor of 9 as in the example we're discussing, then interest rates are of minor concern to get the jackpot payout. As you certainly know, you wouldn't have to take out a loan corresponding to the entire value of your asset, and neither would most banks give it.

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seabass-labrax 6 days ago | parent [-]

OK, 9x the value of your property as liquid wealth is nice, but you'll still need to pay it back eventually, won't you?

	▲	carlosjobim 5 days ago \| parent [-]
		After you've paid it back, you still own the property which is 9x the value, or maybe more. So you can cash out instantly, without having to move out. And you get to pay it back in 30 or 50 years time. By that time, the money is worth half or less than half than what it is today. And your interest is much less than inflation. And you can deduct the interest from your taxes.