I did some digging, and here's what I've found:

You probably wouldn't normally think about the origin of mortgages, because it really doesn't matter to most of you.  But, in reality, it plays such a huge role in the use of borrowed money today, that little history lesson is in order.

The first time the word mortgage was used was as early as 1190. English common law included a law that would protect a creditor by giving him an interest in his debtor's property. According to this common law, the mortgage was a "conditional sale". Even though the creditor held title to the property, the debtor could, in the event the debt wasn't paid, sell the property to recover his money. (Sound familiar!)

The history of the actual word "mortgage" begins with the root word "mort" which was the Latin word for death and the root word "gage" which means a pledge to forfeit something of value if a debt is not repaid.  So when you combine the two together, you get, "death if a debt is not repaid".  Brutal, I know! 

Here's something else that is noteworthy.  Originally, ownership rights extended from the center of the earth to the sky. Of course, now they're generally limited to surface rights only. 

It's really important to look at the history of the mortgage before and after the stock market crash on October 29, 1929 because that's where you get your core set of beliefs. Mortgages were used both before and after the crash, but something significant happened in the world of finance before that terrible era.

Before the Great Depression, homeowners were still unable, for the most part (except for a very few), to actually buy a home outright with cash on hand.  So, the mortgage was used as a security instrument for the bank.  By loaning a home buyer money, they were able to "foreclose" on you, if you failed to repay the debt. 

In 1929, when the stock market crashed, that's exactly what the banks had to do.  They needed their money back so the started to ask their borrowers for the money due in one lump sum payment. Back in those days, stocks were similar in nature in that you could buy them with a huge amount of margin (try 90%).  A borrower could bring some money to the table and the bank would essentially lend 900% more on your money to be able to purchase stock.  When the market crashed, the stock brokers needed their money back.  The investors had absolutely no choice but to go to their banks and withdraw whatever cash they had left. Do you see the death spiral?  Banks began to run out of money, so they inturn started to call their mortgage loans due and payable in full.  When homeowners who had taken out 30 year mortgages were unable to pay their loans in full, the banks were forced to foreclose.  The result was that millions of people lost their homes due to foreclosure.

This is an important lesson because that is where you (or most likely your parents and grandparents) get your underlying beliefs about mortgages.  You think that paying them off quickly and making extra payments is the way because you don't want your bank to call your loan due suddenly.  Right?  Well guess what?  The US legislature actually changed the rules decades ago, so that banks are not allowed to call a loan due before it's maturity date.  What this means for you is that if you send your payment in this month, there is absolutely, positively nothing that the bank can do except wait for the next months payment.  As a result, carrying a mortgage doesn't actually carry the same risk that it did in the Great Depression era. 

So, many of your underlying beliefs come from your parents (and grandparents) and they taught you that mortgages are bad news.  You shouldn't have one because it is considered a burden or that the bank can call it due at any time.  As you'll see on my successive blog posts, the rules of mortgages have changed since then.  Carrying a mortgage should no longer be considered a burden, but rather a tool that can be molded to help you create real long term wealth...without all the risk!

For more info, check out my outside blog at http://www.mortgage-wealth.com