I was reading through the Yahoo Personal Finance section the other day and noticed this article from Jack Guttentag. Generally, Yahoo Finance has interesting articles, though they usually stick to common thematic elements and lists of things that you should or shouldn’t do. Ok, guys… we’ve all seen enough of those lists. Give us some more columnists like Robert Kiyosaki and Penelope Trunk. I know why the columnists write these long articles that have been rehashed time and again and I know why Yahoo Finance wants them as well. It wants to be taken as a serious publication, after all However, it seems that sometimes they tend to illustrate examples in depth, when they don’t need much illustration at all.

Let’s face it, when you buy a house, if you expect to generate a long term return that is greater than the mortgage rate (after tax savings), it makes sense from a mathematical standpoint to use the tool we know as a mortgage. Now, you’ll notice that I said mathematical because there are a whole host of other considerations that need to go into the decision making process. For instance, there’s a reason why companies prefer equity over debt. Equity does not have to be repaid on a repayment schedule, nor does it generally cause the business to go bankrupt, or in this case, the owner to foreclose. Some people would claim that this and the fact that having your money in the stock market or short term securities is more liquid, is a much greater issue than anyone would have us believe.

I agree.

Financial flexibility is one of the keystones of American business and has allowed the United States to thrive in a calculating global environment. The flexibility that one needs doesn’t really differ much from person to person. It’s the amount that you’re putting into your house as a percentage of your overall assets that really matters. If you have the financial cushion, don’t need the flexibility, and can achieve a greater return on your assets than the after savings mortgage rate, keep the money. Even if you only have the first two, keep the money and take the mortgage. Otherwise, use the mortgage and pay it down according to schedule.

On a side note, what’s with all the mortgage applications that I keep on getting in the mail. Haven’t they figured out that most people aren’t refinancing these days, let alone responding to one of these cold call letters? More on this later, maybe.

Oh, and I forgot one thing. There’s always the risk that you don’t achieve greater returns. After all, there is risk in EVERY investment…