That's exactly how they work. As long as you keep making interest payments, and the value of the asset you took the loan against remains above a pre-defined threshold, you never need pay back the principal. The idea being that you invest the money you borrowed and earn a profit on the difference between the interest payment and your investment return. And the interest payment itself is tax-deductible because you borrowed to invest. Neat trick, right?
Btw, this is a power also available to ordinary people, in the form of a HELOC.
Is that true though? "Ordinary people" also have to pay additional fees (ex. Mortgage insurance), have higher interest rates, and have access to fewer high-interest investment opportunities.
I mean, I'm glad I didn't HELOC my way to a few Bitcoin last month, so maybe it's best we leave these tricks to the rich folk anyway.
That's exactly how they work. As long as you keep making interest payments, and the value of the asset you took the loan against remains above a pre-defined threshold, you never need pay back the principal. The idea being that you invest the money you borrowed and earn a profit on the difference between the interest payment and your investment return. And the interest payment itself is tax-deductible because you borrowed to invest. Neat trick, right?
Btw, this is a power also available to ordinary people, in the form of a HELOC.