Nine Reasons To Love Your Mortgage

by | Sep 10, 2014 | Blog, Mortgage & Finance

Financial Investment of a HomeLet’s face it, most of us dread the day each month when it comes time to pay the mortgage. We might even find ourselves wondering if the monthly budget drain is worth it in the long run. But what if you could see your mortgage as an opportunity, rather than an obligation?

Recently, the Wall Street Journal took a clear-eyed look at the advantages a mortgage provides in an article titled “Nine Reasons to Love Your Mortgage.”

We think the ideas bear repeating. Here are WSJ’s reasons to appreciate your mortgage:

1. It’s a cheap way to borrow money: Especially now, with low interest rates, a mortgage is a great way to borrow money, and the interest is tax deductible. WSJ evennotes that it might be wise to consider taking out a larger mortgage to cover your other debts, as well.

2. It’s a negative bond: If you own bonds, it’s likely that their yield is less than your mortgage’s interest rate. You might consider selling your bonds and paying down your mortgage.

3. It’s a safety net for emergency money: Once you’ve built up equity in your home, you can borrow against it. Should you be hit with unexpected home repairs or medical bills, you can draw on a home equity line of credit.

4. It’s a hedge against inflation: Inflation may rise, but your fixed-rate mortgage stays the same, which means that you are repaying the loan with less valuable dollars.

5. Likewise, you can profit from falling interest rates: If rates fall, you can always refinance at a lower rate.

6. It’s an important part of your financial portfolio. “Suppose you own a $400,000 home with a $300,000 mortgage. Your other significant asset is $200,000 in stocks. In effect, what you have is a $600,000 real estate-and-stock portfolio, half of which is bought with borrowed money,” says WSJ.

7. It can be your default investment: If you’re afraid of today’s high stock prices and unimpressed by current low bond yields, you can pay down your mortgage as another way to maximize your investments. If your mortgage costs 5% in interest, for example, that’s the pretax rate of return you would earn by paying down the principle early.

8. It helps build wealth: Don’t focus onthe idea that your home appreciates over the years. As WSJ reports, “Over the past 30 years, prices nationally are up 3.6% a year, as measured by the Freddie Mac House Price Index. That’s barely ahead of the 2.8% inflation rate.” But having a monthly mortgage helps build wealth by forcing  you to save toward eventually owning a valuable asset. 

9. You’ll feel great when it’s paid off: Once the mortgage is paid off, your cost of living decreases dramatically. “Indeed,” says WSJ, “making that last mortgage payment is often the signal that retirement is finally affordable.”

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