While many people believe that it is better to pay your mortgage down as quickly as possible, it really isn’t always the best strategy.

Making this decision depends on your individual situation and should not be taken likely. First of all, every other piece of debt you have should be paid off first unless it is at a lower rate than your mortgage. There is no point in having clear title on your house if you have $10000 in credit card debt at 19% interest.

If you are the type of person who is good at saving money for the future, you may even want to use your mortgage as leverage to increase your savings. If you can consistently make 12% interest on your investments and are only paying 6% on your mortgage there is obviously an advantage to making the monthly payments rather than abolishing them. Of course you have to be willing to make the payments and have the ability to carry the debt load.

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The recent introduction of high amortization mortgages was originally intended to help buyers qualify for mortgages. In effect, it made it easier to get a higher mortgage based on the same amount of income that would have qualified you for much less based on a 25 year amortization. For the most part, the train of thought has been that if you can afford to qualify based on a shorter amortization, you should probably take the shorter option such that your mortgage is paid off quicker. Well, that is a good theory, but there are other more lucrative options should you be willing to look for them.

For example, the title of this post indicates that by amortizing your mortgage over 40 years, there is the potential to make $3,000,000. This is indeed true, if you are willing to look at the situation from a different angle than most. Lets look at the following example. (more…)

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