It used to be that when you paid off your mortgage, you had a party to burn the bank documents. Today, two thirds of American homeowners have mortgages on their properties with an accumulated debt of $8.2 trillion. They amassed much of that since 2000, when the level of interest rates dropped to historical lows, motivating renters to buy for the first time. While the dollar amount is significant, the substantial increase in home prices between 2000 and 2005 has greatly improved the average Americans net worth. For most people, their home is their biggest investment.
Mortgages are forced savings vehicles. Most people when left to make their own financial decisions often procrastinate or worse, make poor choices without doing any research. With a mortgage, you know that every month a large portion of your paycheck is going to pay principal and interest. Slowly you chip away at the debt until one day, 15 or 30 years down the road, you've paid down the entire debt. There is no retirement vehicle quite as effective.
For those who have never taken the trip down mortgage lane, here is a list of things to keep in mind as you explore your options:
Buying your first home can be scary if you don't have a strategy. As they say, plan your work and work your plan, and you'll be ready to take on the responsibility of a mortgage.