Conventional wisdom among a certain set of financial "advisors" was to mortgage any real estate to the hilt and "invest" capital for a better return elsewhere.
So long as rates were low, houses were appreciating and the income stream continued uninterrupted, it worked during those few years. I'd imagine a lot of the higher end residential RE in foreclosure was once "owned" by people who were thusly "advised," though.
It's just human nature to assume how things are now are how things always will be. That can work to the bad, for the unobservant, and to the good, for the observant.
And then, there are the financially clueless who are suddenly vaulted into wealth due to musical talent, athletic ability or winning the lottery. It gets p*ssed away far more often than not.
There’s some truth to the concept but not at this level.
However, if an average person has a 100k mortgage and 100k in savings, they *could* pay off their house, but then they’d be BROKE. They’d have a paid-for house, but zero savings.
Granted, in that scenario, they could then save a lot of cash rather quickly no longer having that payment, but most advisors would tell the person in my example NOT to pay off their mortgage at least not yet.
And one could safely bet that anyone whose name starts with La or Ja or Da has been doomed to this category because his mother didn't pick a better name for him.