Ace investor Warren Buffett has a wealth of timeless advice that can be applied across generations. From investments to personal finance to real estate, his wisdom offers a fresh perspective that actually works.During a CNBC interview in 2017, the billionaire explained that one investment is the“best in the world,”and works in favor of the person willing to take it. Though unconventional, he stressed that it adds wealth over the long term instead of breaking it.

A 30-year mortgage is“the best instrument in the world,”said Warren Buffett close to a decade ago. He also described the move as a“one-way bet”that actually works in favor of the homeowner. He stressed that only if an owner stays in the house with family for a lifetime, the 30-year mortgage allows him or her to build bigger wealth, and also have a home at the end of the tenure.

“If you know you’re going to live in a given area, or think it’s very likely, for a considerable period of time, and you’ve got a family, the home is terrific,”Warren Buffett said.“One of the reasons a home is a terrific buy is because of the 30-year mortgage,”he said. The structure of this investment is that over the years, the monthly EMI will be adjusted for inflation.

For instance, decades ago, if a mortgage EMI was $1,500 for a home, now, the same $1,500 is worth nothing and can be easily paid. Similarly, in the present scenario, a $3,000 to $5,000 mortgage which feels expensive now, over the decades will also be worth nothing, as the EMI amount would feel smaller as the years pass due to inflation.

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“When I bought it for $150,000, I borrowed some money from Great Western Savings and Loans. So I probably only had $30,000 of equity in it or something like that. It’s the only mortgage I’ve had for 50 years,”Warren Buffett said. The same $150,000 today is an easy affair to pay off and will look smaller in amount as the years pass.

“A 30-year mortgage is the best instrument in the world. Because if you’re wrong and rates go to 2%, which I don’t think they will, you pay it off. It’s a one-way renegotiation. It is an incredibly attractive instrument for the homeowner and you’ve got a one-way bet,”Warren Buffett summed it up.

Source: Watcher Guru