Use Your Mortgage For Financial Prosperity

(If owning a home with a white picket fence and two children is the American dream, then being able to pay off the mortgage of that dream must be ecstasy.)

Most of the public believe this as they struggle month by month to pay that large chunk of mortgage. Once the mortgage is paid in full, ah, relief!

But is that really the way to go? Is it worth it to make an extra payment or two when you have a little extra cash, barring there are no prepayment penalties, just to rid yourself of that awful thing (your mortgage) a couple months early?

If you want to learn one of the real estate industry's trademark secrets and use your mortgage as an investment, heed the advice from Luigi Frascati's article, "American Dream 2007: Keep Those Real Estate Properties Financed!," which was posted on ezinearticles.com.

"Why is it that a small group of Americans and Canadians, who are invariably among the wealthiest five percent of the population, insist on carrying on a mortgage even if they can afford to wipe it out entirely today?"

The biggest secret in the real estate industry is that a mortgage is a loan primarily against a borrower's income and not against the value of a house.

"If this was not the case, then naturally anyone with a $30,000 annual income would qualify to purchase a multi-million dollar mansion."

The accumulation of wealth is a popular term coined by economists and preached by money-making mortgage coaches. The accumulation of wealth is driven by capitalism in the sense that it provides value-increasing production which makes net additions to the stock of wealth. Capital accumulates from transferring ownership of assets from one place to another, which will increase the total stock of the assets.

"Other things being equal, if surplus value fails to grow sufficiently, the level of debt will increase, ultimately causing a breakdown of the wealth accumulation process."

"This is exactly the reason why saving money has never made anyone rich. For some obscure logic people generally tend to equate the concept of saving money with that of making money, yet the two are not synonymous."

To further emphasize this point, people want to save money in mortgage interest payments, so they pay off their mortgages as soon as possible. Then they focus their financial attention on retirement and begin to save whatever they can, but never actually accumulate wealth.

"By prioritizing mortgage repayments, they fail to consider the role that mortgages play in their wealth building process. The battle to reduce interest expenses is won, but the wealth accumulation war is lost. The reason is that every dollar they have returned to the bank is a dollar they have not invested."

You cannot accumulate wealth without investing.

You figure that mortgage rates right now are around 6.0 to 6.5 percent. Just about any form of investment will earn over that annually for the next 30 years. "Stocks have been averaging a 10 percent return since 1926." So, if you invest the money you are saving by not paying off your mortgage early, you stand to make about 4.0 percent annually.

The San Diego-based financial services company, Lyons Enterprises Incorporated, uses this accumulation of wealth strategy to inform their clients about the financial power every dollar represents. One dollar can be invested into multiple entities, multiple times.

"The simple truth is that mortgages do not affect home values. But being primarily financial instruments anchored to income, they do affect the wealth maximizing process of investors and market participants by opening up a host of possibilities to invest liquid money derived by consumers' own income elsewhere, for higher rates of return."

That is what the accumulation of wealth process is all about.

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