While we are hearing a lot in the news media as of late about the fate of our economy, the dramatic changes in the mortgage industry, the dive in stocks, I'd like to suggest that we get back to the basics. I am not a financial planner, and I do agree that right now is not the time to pull money from the stock market- like the housing market, we are buying stocks on sale, but I do think this is a good time to remind homeowners that one way to secure a good financial future is to pay extra principal!

I've had colleagues and customers over the years tell me that this is a bad idea, that if they had extra money they should put it in the stock market where they can average an 11% return. Well, my challenge is this, you can't guarantee an 11% return, but if you pay extra principal on your mortgage, you will guarantee yourself at least that much savings- if your current rate is 6%, every extra dollar you pay is a dollar the bank cannot charge you 6% on, so you've saved that money!

To see how effective paying extra could be, I've attached a useful X-tra Principal Calculator:

http://www.mortgage-calc.com/mortgage/prepay.php

Financial planners often assume that in order to retire, you'll need to live on 70% of your pre-retirement income- well, that's hard to do with a house payment.

Also, if you have your house paid off before or shortly after your children go to college, one may just be able to afford to send them.

I've also heard other lenders say, maximize your mortgage debt, that by doing so, you're in a better position with your lender in case you ever need to negotiate, that the more you owe, the more you can control the lender-here's my response- the less you owe, you could get your loan re-amortized if you need to do reduce your payments in a crunch. And I think to myself, does this other broker really think the borrower can control the lender? Has he dealt with loss mitigation on behalf of clients? Who is really at whose mercy- I don't think the lender is at the mercy of the client!

I'm not suggesting that people pay aggressively on their mortgages without first having an emergency fund, but I do think more of us should get back to the basics- it's sort of like that adage- don't have your eggs all in one basket. If more clients were paying extra principal and they had to sell, they just might be able to do so without having a short sale and ruining their credit or worse yet a foreclosure.