Most people view mortgage loans as a necessary evil. I am frequently asked about bi-weekly plans, 15 year mortgages and other ways to pay off the loan more quickly. What few people realize is that a mortgage is one of the most powerful financial tools we possess. Let's look at it this way, consider how much you would deposit in an investment account with the following features:
- The customer can pay more than the monthly contribution but not less
- If the customer attempts to pay less the financial institution may keep all of the previous contributions
- The money in the account is not liquid
- The money earns a zero percent rate of return
- The customer's tax liability usually increases with each new contribution
- When the plan is fully funded, there is no income paid out
Not many of us would place money in such an account yet many of us are. This is what happens when you pay against a traditional amortizing mortgage! Instead of paying extra money into this account, consider contacting your investment advisor to see if these dollars can instead grow in a safe, conservative and tax advantaged side fund. This simple strategy may save the average homeowner thousands over the life of their loan.