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 by: Jed Baguio

If youre planning to refinance youre home or apply for a home mortgage. This could be one of the most the best tips youll ever recieve. If youre like majority of the population which applies for home mortgage and chooses to put a large down payment, with the shortest term attainable and paying if off as soon as possible and thinking that their doing it smart. Well, Im sorry to burst the bubble, but frankly its not smart from a financial standpoint and such idea could lead you to a big mistake.

Now I know that could be a shock to you, or make you feel uncomfortable and you should. This goes against the grain of what the majority of the populations concept of smart handling of home mortgages. Nevertheless, read on. Ill share to you the smart way of doing it.

The answer of how to do it smartly is exactly the opposite what the majoritys idea of smart. Yep, you heard that right! This means the smart way is applying little amount of cash as down payment (But just be sure that monthly home mortgage payments only consist 30% of youre total debt just to be safe), taking the longest term available and never pay off youre home mortgage! Now this strategy may not be applicable at all times. It depends, like most financial strategy, on economic climate. Specifically factors such as home mortgage rates and youre ability to find a profitable investment vehicle. Yes, you need to start investing, were talking about being financially smart and you cant achieve that if you dont or cant invest.

Lets start to elaborate why our strategy is more financially smart than the majoritys "smart". To better illustrate Ill share to you a technique thats one of the pillars of wealth building. The technique Im talking about is you borrow money, lets say $10,000 with an interest rate of 5% per year and you invest that money with an investment vehicle, lets say a mutual fund, with a 10% growth per year. Now lets do the math.

Borrowed Money 10,000

Total Earned 1,000 (10% of 10,000)

Total Interest Paid 500 (5% of 10,000)

-----------------------------

Total Earned $ 500

You could be sitting on a 500$ net profit! This may not be large amount of money, but remember you invested nothing of youre money giving you a Return On Investment of infinity.

How does this relate to applying home mortgage? Its the same thing concept.

* You pay as little amount of cash possible.

- This will increase youre good debt

- Put youre "down payment to be" cash to an investment vehicle. Earning you 10% or whatever then paying the home mortgage with their 5% or whatever. Giving you a profit. Important! The numbers may not be the same for you, but just be sure youre earning percentage is higher than home mortgage percentage.

* Choose the longest term. This lowers youre monthly payment and most occasions lowering youre interest rate.

* Dont pay it off as soon as possible. Dont join any programs that help you achieve that. Instead invest the extra cash to youre favorite profitable investment vehicle. What youd rather want? paying 5% or earning 10%?

By following such steps youre actually borrowing money with 5% interest rate and earning with 10% interest rate giving you a profit of 5%! Important, this is not an exact calculations, in fact this an oversimplified example. This articles also is not aimed as an How To, but rather to give you an idea of the things possible. I still advice that you sit down with a financial advisor to have solutions tailor made to youre situation.

About The Author

This article is written by Jed Baguio. For More Home Mortgage Tips please visit my site http://www.home-mortgage-infocenter.com/.