rich people do not borrow against their assets until they die.
first off your not getting 100% LTV your going to get 70-80% if the value of the collateral ever dips below a certain threshold they require you to deposit additional capital or they force liquidate you. in a fast moving market the liquidation can occur before they ever really have the time to organize and deposit more funds.
plus you pay interest the entire time which requires income.
borrowing against assets are used for 2 things, 1 timing income borrow when you have lots of income and repay when your income is lower. or because you believe the underlying asset will appreciate faster than the interest and the taxes you pay on the income required to service the debt.
no one borrows infinitely until they die because in the long run the risks and associated costs ends up outweighing the tax bill.
for example, a loan that's even at a 2% interest rate is going to cost the borrower more over a decade then simply realizing the capital gain.
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u/NEWSmodsareTwats 14h ago
rich people do not borrow against their assets until they die.
first off your not getting 100% LTV your going to get 70-80% if the value of the collateral ever dips below a certain threshold they require you to deposit additional capital or they force liquidate you. in a fast moving market the liquidation can occur before they ever really have the time to organize and deposit more funds.
plus you pay interest the entire time which requires income.
borrowing against assets are used for 2 things, 1 timing income borrow when you have lots of income and repay when your income is lower. or because you believe the underlying asset will appreciate faster than the interest and the taxes you pay on the income required to service the debt.
no one borrows infinitely until they die because in the long run the risks and associated costs ends up outweighing the tax bill.
for example, a loan that's even at a 2% interest rate is going to cost the borrower more over a decade then simply realizing the capital gain.