Just like your parents, you don’t want a mortgage. You want a nice home for sure, just no mortgage to go with it. Most people absolutely hate having a mortgage and would like to get rid of is as fast as possible. I get it.

And let’s face it, our parents told us to put down as much money as possible and pay it off quickly. They learned this from their parents. By understanding why they had this strong desire to get rid of their mortgages, it might clear things up a bit.

Back in the day (1920’s and 1930’s) the bank could call the note and come get the house on a whim. There was no protection. And when the stock market crashed, you can bet that is exactly what they did. Millions of hard working American’s lost their homes. This perpetuated the mindset thru generations to come.

Thankfully, and with good reason, Congress changed the rules decades ago. Banks are no longer to demand that you repay your mortgage loan immediately. As long as you make your payments, the bank can do nothing but wait on the next payment, and the next.

So how is it really possible that carrying a mortgage can be a good thing? It may sound counter intuitive, but try to suspend your disbelief for a moment and let’s dive in.

Your mortgage is a financial tool, and if you know how to use it properly, it can help you grow your wealth to get to financial security faster. This isn’t about pulling money out and investing it somewhere else so it can grow. I’m not talking about equity repositioning. This is about improving cash flow so you put money in places where it can grow at a greater pace than the cost of the mortgage.

Money doesn’t grow in a house, just like it doesn’t grow on trees. The home will appreciate no matter how much cash you have invested in it.

If it is financed, yes it will cost you money. At the same time, the financing allows you to keep your cash available for opportunities.

Try this on: Let’s say you have two jars…

One jar is covered with a lid and you save the 5%* cost of your mortgage.

The second jar has no covering and everything you put in there will grow at a rate of 7%, 8%, 9%. Plus you can reach your hand in at any time and grab some of your money back if there is an unforeseen circumstance.

The lid on the first jar prevents you from accessing your savings.

Which jar do you want?

You might be asking… “but in this market, where could I get that kind of rate of return?”

Let’s look at some real data to answer that:

• The S&P500 gained 15.1% in calendar year 2010.
• The long term average of the past 50 years (1961-2010), the S&P gained an average of 9.7% per year.
• Over the last 26 years, through 12/31/10, the S&P 500 is up +1,086% total return (yes, one thousand plus percent!) or an annualized 10% per year.

Statistics don’t lie. Isn’t it funny how people will flock to the stores and buy, buy, buy when there is a fire sale? But in the financial markets they sell as soon as the prices drop instead of buying more for less.

If you responded to a downturn in the market with a knee jerk reaction and pulled your money out – you may have missed the very best days and that could have cost you big time! If you missed just the 3 best trading days of 2010, your return fell to where you only gained 3.4%.  This cements what Warren Buffett says, “our favorite holding period is forever.”  You have to be invested at all times, for the long haul.

Values matter at time of retirement, when you are ready to start withdrawing. Until then, if they drop, relish the opportunity and buy more. Keep your money, let it grow and work for you. Invest for the long haul. As for Mortgages, money is awfully cheap right now, plus their could be other benefits depending upon your circumstances.

Yikes, Grandpa is probably flipping out in his grave at this point. But let’s face it, times have changed. And if the majority were right about money, then the majority would be wealthy, like Warren Buffett and Bill Gates.

*for illustration purposes