100% Down vs Financing - What does the bible say?

Rental Property Investor · St. Louis, MO · Member since 2013 · 194 posts · 100 votes

I'm having a conversation with another Christian businessman, and he is convicted that "the borrower is slave to the lender". I know the arguments for and against borrowing to buy real estate, and from a purely mathematical argument it looks like leveraging good long term financing produces the best return. I am looking for a convincing theological argument for leverage. At what point is leverage a partnership? What is wise and unwise, according to the Bible? The first example that comes to my mind is The Parable of the Talents. However, I've only seen that interpreted in light of knowledge of the Gospel, not in a literal financial sense. If you have thought through this, or want to, please join in.

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Matt R.

Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes

10y

I absolutely hate owing people money. However, Jesus might be ok with these interest rates.

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
Well I made a living selling property owner financed to my Bay Area Saudi clients who could not pay interest for religious reasons... and its how I discovered the no interest seller carry back loan that has treated me very well over the years...
AS for the Christian side of things have never really heard that slant that you state... and I know a lot of Christians
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Jeff B.
Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
10y
Originally posted by @Denny Robert:

I'm having a conversation with another Christian businessman, and he is convicted that "the borrower is slave to the lender".
I am looking for a convincing theological argument for leverage.
If you have thought through this, or want to, please join in.
Lot's of people have Bible based beliefs including yours truly, and there's good council that applies when dealing with a closed mind . . . "don't cast your pearls ...".
If we went back to the Mosaic law, we would be applying "eye for an eye" and the jails would be empty.
Smile for your friend and just "turn the other cheek" - - move on.
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Joshua D.
Investor · Columbus, MT · Member since 2013 · 1k+ posts · 1k+ votes
10y
@Denny Robert
As a pastor, I have thought about this on many occasions, as we look at the verse often quoted by anti-debt folks "borrower is slave to the lender" notice this is a statement of fact not a moral or theological pronouncement. It is a proverb...
Many non-Christian folks would agree with this proverb. Being in debt means that YOU are responsible to to pay it back... That means YOU have to sweat, toil, and produce to give someone else money. Kinda like a servant/slave back in those times.
As a Christian I cannot see from this verse that you are doing wrong by having debt. Just that you are going to have to form to the relationship of a servant/slave for a wile.
Jesus did teach on money on many occasions, telling us to store up treasures that will make an ETERNAL difference, not just treasures on earth. (Mathew 6) He also told about a guy who spent his life pileing up a huge amount of grain in barns and the died... Jesus called him a fool.
Jesus keeps pointing us to the reality that life is short... And eternity is forever. Why would you invest only for temporary things and not for eternity.
I do not believe he is against building wealth, only that earthly wealth should not be the center of our lives.
With that said. The debt issue is not THE issue that Jesus is getting at. To me it is almost like someone asking if "whole life" or "term" is better insurance, from a Christian perspective. It don't matter! Where is your heart set! Making a difference in other people's lives or on yourself?
Dang it... Give a preacher a mic and he will preach a sermon. Sorry folks
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Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
10y
I absolutely hate owing people money. However, Jesus might be ok with these interest rates.
15 Reply
Joshua Hill
Property Manager · Tempe, AZ · Member since 2015 · 26 posts · 6 votes
10y
@Denny Robert thank you for posting on this topic! I have had the same question but didn't know where to ask.
@Joshua D. I really appreciate your perspective. I think you're right on!
As I'm writing this I realized I haven't done a simple search for bible verses about debt. Here's what 2 minutes of research produced:
Bible verses about knowing the weight of debt and cautions about it:
Prov 22:7
Bible verses about heart motives and borrowing/money:
Matthew 6:24, Prov 13:11, Eccl 5:10
Bible verses encouraging lending:
Ps 112:5, Matthew 5:42
It seems there's some real wisdom cautioning about getting into debt so that you would know what you're getting into. However, since the Bible also seems to condone lending, I would say it's not totally against the idea of debt at all. Just have your motivations in the right place, your heart in the right place before God, and recognize the very real issues you'll be facing as you accept debt.
Thoughts? Comments? Questions?
@Tony Hill
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Marcus Johnson
Investor · Saint Paul, MN · Member since 2015 · 663 posts · 512 votes
10y
Proverbs 22:7. The rich rule over the poor. The borrower is slave to the lender. All I can say is that is what the bible says.
0 Reply
Chris MasonPro Member
Moderator
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
10y
Wasn't Jesus' only act of violence in his entire life directed at folks in my profession? Cleansing of the Temple or something.
You guys are probably fine. I, on the other hand...
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Shane Caraway
Investor · Albert City, IA · Member since 2014 · 14 posts · 1 vote
10y
I think Mathew 25:14 -30 would work well here. These men made money with and profited with someone else's money. The one ho did not suffered for it.
0 Reply
Shane Caraway
Investor · Albert City, IA · Member since 2014 · 14 posts · 1 vote
10y
who not ho
0 Reply
Eric M.
Investor · Weston, WI · Member since 2016 · 105 posts · 114 votes
10y
Originally posted by @Joshua D.:

@Denny Robert
As a pastor, I have thought about this on many occasions, as we look at the verse often quoted by anti-debt folks "borrower is slave to the lender" notice this is a statement of fact not a moral or theological pronouncement. It is a proverb...
As a Christian I cannot see from this verse that you are doing wrong by having debt. Just that you are going to have to form to the relationship of a servant/slave for a wile.
In Matthew Jesus states that "No man can serve two masters." I've always interpreted that to imply a moral judgement on "the borrower is slave to the lender".
But I am not a pastor and I still borrow money so I guess you need to take my interpretation with a grain of salt
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Leon D.
Investor · Chicago, IL · Member since 2012 · 190 posts · 85 votes
10y
Though I don't have the theological authority to offer my own opinion, here's a nice answer: http://www.gotquestions.org/money-debt.html
2 Reply
Ben Leybovich
Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
10y
OK - I've known for a while that we are in a bubble. But, here's my statement of thesis for today:
We might be in a bubble is - we are taking investment advice from Jesus ... hahaha
Just make good investment decisions, leading you to making lots of money, so you can be charitable, help people, improve your communities, and be a good human in general. I think Jesus would approve :)
And if not, switch teams, cause I'm pretty sire that Moses has no issues here :) LOL
3 Reply
Sean Kuhn
Minooka, IL · Member since 2013 · 353 posts · 85 votes
10y
When you get a loan you're in a business transaction of free will, not slavery. Slavery is being forced into something, no one is forcing anyone to get a loan. Just my two cents.
1 Reply
William Sackett
Contractor · Clive, IA · Member since 2014 · 20 posts · 13 votes
10y
Hello BP This is a great topic. First I want to say that I believe in Christ and what He has done and will do. Ok with that being said here goes. You can either be the master of money or you can be its slave. Money is only good for the good it can do. What is in your heart and what is your mind set when it comes to money. Are you building for your own personal gain or are you bringing others up as well? I personally love to see the light go on in someone's eyes when they finally understand how and why. Or when you give for the sake of giving. But if you don't understand how or why and you don't have anything to give, is that being a good steward? As far as borrowing is concerned I look at this way, Even the master has to feed and house his slaves. You can either let borrowed money be your master or you can master it and use it for good. Either way you still have to feed it by paying interest.
3 Reply
Evan Bellingar
Investor · Newberg, OR · Member since 2016 · 90 posts · 19 votes
10y
Originally posted by @Ben Leybovich:

OK - I've known for a while that we are in a bubble. But, here's my statement of thesis for today:
We might be in a bubble is - we are taking investment advice from Jesus ... hahaha
Just make good investment decisions, leading you to making lots of money, so you can be charitable, help people, improve your communities, and be a good human in general. I think Jesus would approve :)
And if not, switch teams, cause I'm pretty sire that Moses has no issues here :) LOL
Ben,
Theology aside: that made me laugh!
Evan
0 Reply
Evan Bellingar
Investor · Newberg, OR · Member since 2016 · 90 posts · 19 votes
10y
Originally posted by @Jay Hinrichs:

Well I made a living selling property owner financed to my Bay Area Saudi clients who could not pay interest for religious reasons... and its how I discovered the no interest seller carry back loan that has treated me very well over the years...
AS for the Christian side of things have never really heard that slant that you state... and I know a lot of Christians
Jay,
Interesting that you mention your Saudi clients.
I spent a short trip in the Middle East studying Islamic Finance a few years ago. It was very interesting, as their religious teachings were very clear about specifics like borrowing, charging interest, etc.
Modern Islamic Finance essentially provides a large number of "work arounds" that still comply with the religious law. For example, we in the US might buy a car on terms, and have a car payment of $500 per month that includes interest. In Kuwait, you might go to an Islamic bank, THEY buy the car and lease it to you, charge you no interest but your principal payments plus a service charge magically comes to $500 per month. Once you pay off the loan, the car is yours.
Interesting stuff,
Evan
0 Reply
Ben Leybovich
Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
10y
Originally posted by @Evan Bellingar:

Originally posted by @Ben Leybovich:
OK - I've known for a while that we are in a bubble. But, here's my statement of thesis for today:
We might be in a bubble is - we are taking investment advice from Jesus ... hahaha
Just make good investment decisions, leading you to making lots of money, so you can be charitable, help people, improve your communities, and be a good human in general. I think Jesus would approve :)
And if not, switch teams, cause I'm pretty sire that Moses has no issues here :) LOL
Ben,
Theology aside: that made me laugh!
Evan
Haha - I should hope so, Evan :)
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Evan Bellingar I simply did zero % loans but made the terms very short... 30 months no interest has the same PV of money as a 15% note at 7 years... same concept.
That was back in the mid 80's and I stumbled upon it.
fast forward to the last crash. and when I ended up owning 200 plus homes.. that I foreclosed on... I sold many of these using those same techiniques... higher than normal payments but short term.. and I have never had to take one back.. if you sell with low payments and a long time folks tend to walk.. its why seller carry back on low end homes the default rate is enormous. my deals they get in it 18 months and the house is half paid for.. they just gut it out and don't walk.. I was able to get my principal back in many instances unlike banks that lost principal on the resale of OREO>
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1 Reply
Brent Coombs
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
10y
Originally posted by @Leon D.:

Though I don't have the theological authority to offer my own opinion, here's a nice answer:
http://www.gotquestions.org/money-debt.html
If only my grandfather had taken this SENSIBLE interpretation, my grandmother wouldn't have had to see out her days living in a caravan (but, still praised Jesus)!
0 Reply
Brent Coombs
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
10y
@Denny Robert, you can ask that Christian businessman: how does he expect us to live BEFORE we can afford our own home for cash? Rent?
OWE money to a Landlord? How is that in any way: less sinful?
I reckon Solomon includes RENTERS in Proverbs 22:7, rather than just mortgage holders! Renters are slaves of their Landlord!
The argument: "But renters pay in advance" holds NO water, because it is still an obligation, a burden, a debt - to a MASTER!
I particularly like this line out of the above article:- "The Bible has harsh words of condemnation for lenders who abuse those who are bound to them in debt, but it does not condemn the debtor".
The point is, NO-ONE is perfect! God readily loves masters, AND slaves!
1 Reply
Ryan Dossey
Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
10y
If you look at an actual loan you are tying up a portion of your capital for X amount of years. We don't know the future so we can't necessarily guarantee that we will always be in the same financial position. For instance... Guy gets a promotion.... Buys a boat. Company runs into issues and has to start doing layoffs. All of the sudden that $500 a month payment feels like slavery. When you are an employee you ARE trading your time for $$$. If a good portion of your "time" goes to that boat loan... That feels like slavery. You're working just to break even. (How miserable?)
As an investor if you have an intelligently leveraged portfolio that pays for itself (even in an economic down turn) you don't really run into the above scenario. You don't end up working to pay for your multifamily assets. They work for you.
"Now where in the Bible does it say this?" It doesn't. But the Bible tells us to value wisdom above all else. Wisdom tells me that I shouldn't finance a new Ferrari at 6% interest for 10 years. But in my humble opinion there is nothing wrong with intelligent leveraging.
I've never been a Ramsey fan because I believe in wise leveraging.
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Denny Robert
OP
Rental Property Investor · St. Louis, MO · Member since 2013 · 194 posts · 100 votes
10y
Thanks everyone for the great replies. I agree. It seems like WISE and INTELLIGENT leverage seems like a non-issue. I bought a triplex on 30 year bank financing. It cash flows wonderfully, and as long as I manage my money and keep an emergency fund it shouldn't be a problem. I also bought a fourplex last year on owner financing - a 3 year balloon. The price was right. Similar properties sold for over $100-$200k more in the same area. The 3 year balloon has me a bit nervous, but it cashflows well. Just need to lock up that long term financing. I'm not sure I'll go down that road again. This property is what started the conversation in the first place, but my friend believes in 100% down. Ultimately I guess the fourplex does have a speculation component to it, and if the market upends itself it will bite me. It also might end up a great long term investment once I lock up long term financing, or a decent flip if I decide to sell it before the. 3 year term is up.
1 Reply
Eric Hulstrand
Enterpreneur, Church Planter, Pastor · Eden Prairie, MN · Member since 2015 · 17 posts · 4 votes
10y
Couple thoughts as a pastor/investor (FWIW)...
1. The verse you mentioned in your original post (borrower slave to lender) is a Description verse versus a Prescription verse. The Bible describes many things, like Judah having sex with his daughter-in-law in Genesis 38 (yuck!), but that doesn't mean "go and do likewise"! Proverbs is a book of observations or descriptions, not necessarily prescriptions. Solomon, et.al are basically saying "watch out and here's why from what we've observed."
2. Jesus' most helpful, IMO, teaching on business and money is found in Luke 16 with the parable of the shrewd manager. He basically says that "people of the light" should be just as shrewd with their money and financial dealings as "people of the world". People tend to avoid Jesus' story, however, because the hero is a crook!
3. Related to #2, the word "Shrewd" only comes up in 2 places in the Bible, above and Matt. 10:16. Both of them have to do with how we interact with the wider world.
So, let's "be as shrewd as snakes and as innocent as doves."
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Denny Robert
OP
Rental Property Investor · St. Louis, MO · Member since 2013 · 194 posts · 100 votes
10y
Originally posted by @Eric Hulstrand:

Couple thoughts as a pastor/investor (FWIW)...
1. The verse you mentioned in your original post (borrower slave to lender) is a Description verse versus a Prescription verse. The Bible describes many things, like Judah having sex with his daughter-in-law in Genesis 38 (yuck!), but that doesn't mean "go and do likewise"! Proverbs is a book of observations or descriptions, not necessarily prescriptions. Solomon, et.al are basically saying "watch out and here's why from what we've observed."
2. Jesus' most helpful, IMO, teaching on business and money is found in Luke 16 with the parable of the shrewd manager. He basically says that "people of the light" should be just as shrewd with their money and financial dealings as "people of the world". People tend to avoid Jesus' story, however, because the hero is a crook!
3. Related to #2, the word "Shrewd" only comes up in 2 places in the Bible, above and Matt. 10:16. Both of them have to do with how we interact with the wider world.
So, let's "be as shrewd as snakes and as innocent as doves."
Helpful conversation. Thanks @Eric Hulstrand.
I would receive that teaching as making the highest ROI decision possible without sinning against others. This would lead me towards using leverage in ways that aren't risky (Gross Income = PITI + Expenses + Mgmt + Cashflow...).
I can see how leaning conservatively is more likely to keep you out of hot water/potential to be in sin. However, it sounds like the act itself isn't wrong (borrowing), but the heart and being over leveraged is. Like most things I encounter in this world, a black and white answer doesn't seem to be the best one.
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Chris Ghemm
National City, CA · Member since 2016 · 18 posts · 6 votes
10y
I am not a pastor or a theologian but this topic has been preached many times in our church with each preacher have different take on the subject. I have also listened to Dave Ramsey who is preaching 100% down but if you listen to his radio show you will learn that he does give exception to borrowing for a house.
The point is most people have DEBT problem because they let emotions control their financial decisions. People think they can afford something if they can pay the monthly payment. Some will work 2 or 3 jobs to pay for the house and/or for the car they can't enjoy. Good investor think differently, they check the numbers first. If the number makes sense then they make the decision to buy.
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