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