The Mortgage Payoff Myth

    Published: 06-16-2009
    Views: 4,393
    Financial Advisor Ric Edelman explains the top reasons for carrying a mortgage including the mortgage payoff myth.

    Ric Edelman: Hi! I am Ric Edelman. We have been talking about the 11 reasons to carry a big long mortgage, and now here is reason number 11.

    You'll never get rid of your monthly payment, no matter how hard you try. You want to eliminate your mortgage so that you don't have to make any payments, well, too bad, because even if you somehow manage to eliminate your mortgage, you won't eliminate your payments.

    Oh sure! Paying off your mortgage means you no longer make any principal or interest payments. But mortgages payments are known as PITI, and we've only addressed the P and the I, Principal and Interest. Let's not forget about the T and the other I, or the M and the R.

    I am talking about taxes and insurance. Even if you manage to pay off the loan, you still have to pay property taxes and homeowner's insurance, so your goal of getting rid of the mortgage payment, is impossible! Even if you eliminate the mortgage, you still have to make taxes and insurance payments. And as long as you own your house, you'll have M and R too; Maintenance and Repairs. So don't bother trying to make your mortgage go away. Instead, create wealth so that you can comfortably afford the cost of living and owning your home.

    Now you have heard all eleven reasons to carry a big long mortgage, go ahead, admit it, you are convinced that is the smart financial strategy.