After reading Renting Makes You Richer
, from one of JD's link-posts the other day, I think I ended up being more confused than ever. From what I could tell, the point being made was as follows: If you have $300k and invest them in a house, you'll just break even with inflation, while investing the money long term in the stock market will make you around 7%, adjusted for inflation.
But does this still hold true if you borrow the $300k instead? As long as the interest on the loan is less than the annual return on the stocks, wouldn't it make sense to invest your $300k of savings in the stock market and lend money to buy the house? Also, doesn't buying the house in practice insulate your housing costs from inflation?
Which brings me to yet another question. If the average interest is less than the stock market's (historical) annual return of about 10%, why the rush to pay back your loans? I'm 25 now, wouldn't it make more sense for me to stretch out my mortgage almost to retirement age (or at least, say, 30 years) and invest the monthly difference in the stock market instead?