I think you just outlined some of the reasons people do what works for them. What works as you point out may not be financially the best choice but it's their only option. I'd say those that had choices to look at all the options & chose a path could for many reasons change that path. Circumstance change so I'll stick with what works for people is what people do.
based on my own experience i found i did things because i had no idea about how to evaluate PROPERLY the options .
as an example i was always a big believer in taking a mortgage and investing , a no brainier at these low rates ...
however as i learned more from michael kitces he made me aware of something i never looked at .
keeping a mortgage or not and investing our money is not as simple as just investing....
In effect you are buying equities leveraged with borrowed money . We tend to miss this factor ...
So you need to ask yourself if you were buying stocks on margin what would you want as a risk premium to make it worth doing .... you have 3-4% interest ...you have a risk free treasury bond paying 2% to 3% so how much of a risk premium over a risk free treasury bond would you want to not only buy equities but buy equities on leverage .. maybe 2-3% ?
If you were going to put that borrowed money in a balanced fund with a 6-8% return would you borrow money and do it knowing you have 3-4% interest and an investment with zero risk is paying 2-3% ?
That is a very different question now compared to just get more than the interest you pay.
In effect you are leveraged and your downside is now greater .....
Think this point through very carefully ....we don’t realize we can consider either one the investment bought on leverage when we borrow money and use our cash too.
We like to think it is our money in the stocks and the mortgage in the house but that is only mental masturbation when we do this ....it can be considered either way in effect in reality-because the situation has been altered from either just buying a house or just investing.
The risk premium as it is called becomes very important when using leverage because the downside is greater with leverage and that makes this a very different decision then we usually make.
We just have been fooling ourselves by taking our own money and the borrowed money and applying its use in a way that makes comfortable sense to us but the truth is all that money both your own and borrowed is coming from the same pocket and used interchangeably