Ok, keeping in line with the format of Top Ten Lists, I decided to share some common misconceptions about our home's equity and mortgages.  Here they are...

#10 - When a married couple sells their home, they are required to use the cash proceeds to purchase a new home in order to receive the $500,000 capital gains allowance (tax write off). This is not true, in fact you are not required to put even one penny towards the new home purchase.  You can pocket the gains and set up a new mortgage on the new home.  I recommend this strategy when switching homes to maximize liquidity and tax deductions.

#9 - Financial security is achieved once your home is paid for.  This is an incorrect statement.  Financial security is usually achieved when you have enough liquid assets in a safe environment to offset any liabilities and generate cash flow to cover your living expenses indefinitely.

#8 - Homes with large mortgages get foreclosed on first.  This is actually the opposite of the truth.  Banks are in business to make moeny, so they will close on the homes with the smallest mortgage or the most home equity.

#7 - The lower my mortgage, the more marketable my home is.  This is not necessarily true.  In fact, in a soft real estate market, your home may sell more quickly and for more money if it has a high mortgage balance.

#6 - Your Home's Equity has a rate of return.  Nothing could be farther from the truth here.  Your home's appreciation (or depreciation) is a result of market forces, not how much of a mortgage you have.  The facts are that if you created a rate of return off of home buying and selling, the argument would favor a large mortgage since the amount of money deposited into the home would be less, resulting in a greater rate of return.

#5 - Lower mortgages resulting in lower payments equals lower costs.  This is another incorrect statement.  Everything you buy is 100% financed, remember that.  If you take out a lower mortgage (or pay it off faster), then you sacrifice opportunity and the lost opportunities may actually cost you more than you saved by taking out the lower mortgage.

#4 - Home equity is a safe, liquid investment.  Home equity is not liquid, nor is it safe.  Simply put, when you need to tap into your home's equity, you may not be able to get it and certainly not within a week.  Examples of why are when your home is damaged by a disaster (hurricane, tornado, etc.) or you lose your job.  In these cases a loan is not usually possible.  In the case of your home being damaged, your equity is actually lost until the home can be repaired.

#3 - A mortgage is not a financial tool, it is just another debt, a necessary evil.  This is a really bad approach to viewing your mortgage.  The fact is, your mortgage is a financial tool and needs to be treated as such.  Just like you invest in stocks, mutual funds, or 401(k)s, you must approach your mortgage with a plan or strategy.  However, your home is not an investment, it is a place to live.  You should buy your home because you love it, can afford it, and is in a great location for you, not because you think it will grow in value.

#2 - All mortgage interest is tax deductible.  For an explanation as to why this is incorrect, I will ask you to visit my blog on mortgage interest tax deductions.

And the #1 myth-conceptions is (drum roll please) - Getting wealthy is only for the lucky ones with lots of money or discretionary dollars, taking high risks and achieving high rates of returns.  While this accounts for a lot of wealth in the US, getting wealthy does not require you fall into this category.  In fact, you can often reposition your current expenditures or investments in order to gain positive leverage.  Returns of just 6 or 8 percent interest can create tremendous wealth.  Your attitude will be the most important factor in determining the level of your wealth.

That is why it is important to seek a certified mortgage planning specialist to ensure the proper integration of your mortgage into your overall financial and investment goals!

This is not a complete lsit by any means.  For more truths revealed and guidance on how to shop for a mortgage, scams to avoid and other helpful information, visit my website at http://www.solidrockmortgage.com/ and request the Truth about Mortgages E-book toward the bottom of the home page.  The e-book will be emailed to you automatically.  Feel free to make copies to hand to clients, but it is copyrighted and do not make any changes please.