My Mind on Mortgages

In his book “Borrow Smart Retire Rich” Todd Ballenger discusses the concept of borrowing money out of opportunity versus necessity and at the same time does a nice job of describing financial arbitrage:

Most of us have borrowed out of necessity for houses, cars, or other purchases.  Let’s say you borrow money from a local bank for your house at 7%, the same bank where you deposit your pay check each month.  When you make a deposit to your checking account, you loan the use and control of your money to the bank for a little interst, say 2%.  The bank as a professinoal creditor lends the use and control of their money back to you at 7%.  The bank earnes a 5% spread lending your money back to you.  You borrowed out of necessity, while the bank provided a loan based on opportunity.