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Why people borrow money, and what creates the ongoing demand for mortgage loans?

To conserve cash

Buyers of real property seldom have the total purchase price available in cash or are unwilling to tie up a large amount of real estate money. Real estate is one of the most accessible assets against which to borrow money when relatively little cash is available.

To increase ROI (return on investment)

Borrowing other people’s money at an interest rate less than the overall return rate on a real estate investment creates positive leverage. It can increase the borrower’s total return on investment.

To convert equity into cash

A property owner can refinance owned real estate, which has appreciated in value to generate a sum of cash that can be used for other needs. The money generated through refinancing is not subject to income tax. Converting equity allows significant amounts of money to be raised without the asset’s sale, which continues to grow its value in time.