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Working to Pay Off Your Mortgage

You spend 20 percent of your time working to pay off your mortgage.

Does that seem excessive? When you consider that you work about a third of your day to pay your taxes and about a fifth to cover your mortgage - what's left for you? Not much.

Almost half of what most people earn, on average, goes directly to taxes and big debts like mortgages. The rest isn't exactly going to luxurious clothes or dream vacations. You're probably spending it on necessities and other debts. It's tough these days just to survive, let alone have a little fun.

First-time homebuyers are easily shocked when they sit down and really think about what it means to have a big debt like a mortgage. It's tough to find a decent home these days for under $100,000 - a monstrous debt for anyone, especially younger professionals still struggling to pay off college loans. And mortgage advice can be confusing: Do you try and pay it off early, or do you hang on to the debt?

There's plenty of conflicting advice. Some articles advocate that you put extra money in high-return investments instead of throwing it at a mortgage, especially when you're young. And that makes sense at first. But some articles include a list of reasons why you might want to pay your mortgage off early. Among those reasons was that a homeowner's goal was "to acquire great wealth."

Talk about confusing advice. Who doesn't want to acquire wealth? It makes you feel a bit thick for not wanting to kill off your mortgage as early as possible in pursuit of that fortune. Naturally, those articles don't talk much about how to go about doing that. You have to "make the choice that's right for your needs" - another vague phrase that offers little help.

It turns out a mortgage is a better deal than you might think. You wouldn't know it from those articles. But if you're really looking to acquire wealth, you'll probably need to take out a mortgage in your lifetime.

To get the most out of your mortgage, you have to be an endurance runner, not a sprinter. At the beginning, almost all of your mortgage payments are going toward interest. This means that when you've just taken out your mortgage, you probably are better served putting extra money into investments instead of throwing it at your payment. The payments you do make are tax deductible, which will also save you a chunk of change.

After a while, however, you'll start to make a dent in your principle. At that point, you're not really losing your money - you're making an investment. Much of the time, houses will appreciate in value. It's not a guarantee, of course, but it's more dependable than many stocks. At this point, it helps to think of making payments toward your house as similar to making rent payments - except that when you feel like moving, you can sell your old place at a nice profit.

Buying a home is how most people acquire their wealth, especially younger home-buyers, who tend not to have accumulated the capital to invest significant amounts. A home helps force you to save money. First time homeowners can benefit from programs that insure FHA Home Loans, among others.

So, if the idea of all that debt has scared you away from home ownership, take a deep breath and think about how much you paid this month in rent. That's money you won't ever see again. When you buy a house, you'll pay a similar amount, but you own something of value, something you can sell and get a return on that investment. Or, if you stay in your home, you can take out a reverse mortgage.

Not such a bad deal, right?

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