How to Use Debt (Why Billionaires Get Mortgages)

In this video we talk about the difference between good debt and bad debt, why billionaires take out mortgages and what leverage means.

TIMESTAMPS:
00:00 - Introduction
00:56 - How debt makes money
05:48 - When debt is bad

WHO AM I:
I'm Kiran, a qualified Accountant and experienced tax professional living in the UK. I make videos about finance, tax and investing.

MY FILMING GEAR:

DISCLAIMER:
This content, and the ideas presented in it, are for education and entertainment purposes only. Kiran does not provide tax or investment advice. The information presented does not consider the financial circumstances of any investor, and therefore may not be suitable for all investors.
Although Kiran is an Accountant, no Accountant-Client relationship is established with the viewer in any way.

As an Amazon Associate I earn from qualifying purchases. The product links in the description are affiliate links. This means if you choose to buy something through one of these links, I may receive a commission on the sale, but it makes no difference to you as a buyer.

[savvysocialshow]

You are also using an American system where the rate stays the same where the uk system is linked to the Bank of England base rate

[Penfold__]

Your example of the mortgage gains omitted the interest you pay in your borrowed funds. Let’s say you borrowed that 400k at 5%, your interest payment in year one would be 20k, leaving you with a leveraged return of only 5k. You wouldn’t unlock that leverage benefit until at least year 10.

[MrSalmanBadshah]

Very Good information. Really appreciate your videos. Subscribed.

[ianmorrison]

Some good points, but what about the interest payments over 25-30 years for a mortgage. The interest payments over this time frame is often a significant sum of money.

[Thomas-gtk]

If only my wife would understand this she’s old fashion and likes to be debt free

[YugalJindle]

You are explaining how amazing is leverage, and implying buffet is stupid telling you to stay away from leverage.

[brahimzaidi]

But this has lead to the world of debt and interest which will lead to recessions. Now, I know so many landlords and property investor are trying to sell their properties because of interest. People think oh I am going to make ££ because of debt invested in assets but ultiamtley interest will catch up and society and these investors suffer.

This is why usery or interest is forbidden in islam and even Christianity because God deems it to be unfair to the borrower and not the lender.

Many are trying to open banks because of this but the people are getting poorer. This is an unethical model for business.

Jay z is by far not a role model. How you impact society is also an important principle. This idea of me me me is casuing the world to go into recession every few decades.

[binladensassassin]

this is oversimplified, forgetting high interest on mortgages and associated costs of ownership of property (maintenance etc) which wipes out all of your profit

[gary]

This Should be taught in schools. Then our children wouldn't get into

[gilcarag]

Would be interesting to have a video on when a self-employed should create his/her own company instead and get dividends instead of salaries.

[anthonyjanes]

Hi Kiran, another fab video, thanks for the info. leveraging works well when the asset you are purchasing increases in value ie a property but can be disastrous when the asset falls in value, obviously Billionaires already have the finances to take this risk, I wouldn't suggest that the average Joe in the street take on too much debt, it's a high risk strategy.

[stockae]

I sleep better without a mortgage. If I get hurt a work, and unable to work, I will be very glad I don't have a mortgage.

[aminaliuk]

Ethically, debt creates a rich and poor divide. Only a very few become enormously rich and the rest of society are enslaved with bad debt. So, good debt is also bad. We need an alternative ethical financial system perhaps Islamic banking for the future.

[actiondefence]

If only I was a billionaire then I could afford to get a low rate loan.... 🤷

I'm just a regular guy, never got taught or learned about personal finance and how to be financially responsible and had to learn the hard way.
Decided to tackle my debts and finds I had almost 12k of bad consumer debt.
Cleared it after 3 years and now just have the mortgage.
Don't ever plan on getting more debt again.
Got rid of my credit cards, I can't be trusted to be disciplined enough with them.

[CarlosWillis]

1. Inflation is legalised counterfeiting
2. Counterfeiting is criminalised inflation
3. So central banking is a coordinated currency counterfeiting cartel...that runs the world

[YugalJindle]

You are explaining how amazing is leverage, and implying buffet is stupid telling you to stay away from leverage.

Dangerous advice

[asyed]

Can you speak Punjabi .Financial Freedom a Great way to enjoy life .thanks .

[samsamsung]

If u are an accountant, I am in need of one. I am located in usa. Any waY to get intouch with u mam legal legit help needed

[alb]

So it sounds like you need to have already a lot of money to be able to afford a mortgage at lower rates...

[samsamsung]

U have to be cpa with ein and based in usa cause I am also based in usa