Mortgage interest payments are often tax-deductible, reducing your overall tax bill. This means the 'effective' interest rate you actually pay is significantly lower than the 'nominal' rate quoted by the bank, making the debt even cheaper and investment arbitrage more profitable.

Debt isn't inherently bad; it can be a powerful financial tool. By taking on low-cost debt like a mortgage, you can invest that capital in opportunities, such as the S&P 500, that are likely to generate a return greater than the interest owed, effectively creating wealth.

Not all debt is negative. Using leverage to acquire assets that generate returns—like real estate, inventory, or business investments—is a smart wealth-building tool. Conversely, financing depreciating lifestyle items ('flexing') creates a financial hole that's nearly impossible to escape.

A key principle of "old wealth" is using debt with an interest rate below market returns to grow money exponentially. Conversely, "new wealth" challenges traditional wisdom by recognizing that in many markets, renting and investing a down payment can yield higher returns than home ownership.

Common wisdom to rapidly pay off a mortgage is suboptimal. Due to compounding, investing extra cash—even if the return rate merely matches your mortgage interest—will generate significantly more wealth over time. One investment compounds up while the other debt amortizes down, creating a large wealth gap.

While the S&P 500 may offer a higher percentage return (8-10%) than real estate (4-5%), leverage changes the equation. Borrowing 80% of a property's value means a 4% appreciation on the total asset results in a significantly larger return on the actual cash invested, outpacing a dollar-for-dollar stock investment.

Wealthy people don't avoid debt; they use it as a tool called 'leverage'. They borrow money at a low interest rate to invest in assets that generate a higher return, effectively profiting from the spread.

The wealthiest individuals don't have traditional paychecks. Instead, they hold appreciating assets like stock and take out loans against that wealth to fund their lifestyles. This avoids triggering capital gains or income taxes, a key reason proponents are pushing for a direct wealth tax in California to address this loophole.

Patel argues it's a financial mistake to accelerate payments on cheap debt, like a sub-4% mortgage. The emotional win of being "debt-free" is outweighed by the mathematical loss. That extra cash would generate superior returns invested in the S&P 500 or even a high-yield savings account.