[Zetack]

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Paying cash for a house is not very smart...1st of all all the interest is tax deductable (talking in the US obv..no idea for Canada)...since you will obv be paying some taxes the interest is "free" money...you can earn 10% on your money in the market fairly easy. So assume 10% return and 6% interest rate on loan and you are throwing away $80,000 per year on a $500,000 house....

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Your math confuses me. I see $20k on the 4% float. As for the tax break, that's not free money its money that's somewhere in the 65 cents on the dollar range. Effectively, if I'm doing the math right, the tax break, assuming you're in the highest tax bracket, effectively reduces a 6% interest rate to 3.9%. Call it 4% for short.

So maybe you can count the value as of being able to invest the money as 30k on a $500,000 loan. But I'm no math expert so maybe I'm wrong on that.

Also, 10% is a nice return, a lot of people manage not to invest that well. (I mean, index funds are so fricken boring...)

Now say the house is $180k not $500k. Now you're talking about a little over 10k a year. Still not nothing, but maybe not worth it for somebody who'd rather have piece of mind of an asset free and clear -- and in any case, not anything like $80k a year.

--Zetack