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Financial advisors and banks have been telling the masses for years that they should hand over extra money each month toward their mortgage in order to reduce the time period for paying off the loan and to cut down on the interest coughed up.

For instance, if you borrow $200,000 over 30 years at a rate of 5%, your monthly payments would be around $1074. Over the next 30 years, you will actually hand over an additional $186,640 in interest for a grand total of $386,640!

Now, the reason that banks and financial advisors tell you to hand over more is that because if you could hand over an extra $246 a month with a total of $1320 going toward your mortgage each month then you would cut 10 years off your mortgage payment period. You would save $69,756 over the course of the loan and reduce your total payments to $316,664.

OK, so maybe now the little voice in your head is saying something like, "I don't want to hand over more each month! I want to hand over less each month like the title of the article says. Now I am to show you why forking out a lot more money toward your mortgage is not the best move that you can make. The problem with this thinking is that it does not take into account the "time value" of money.

So why do financial advisors and bankers preach what they preach. Paying off your mortgae faster means much less risk to the bank and it gives them the opportunity to lend the money to others. On top of that, banks always pick the homeowners that have PAID MORE money toward their mortgage when they decide who to foreclose on because it exposes them to less risk. This is completely the opposite of the belief that the bank won't target the masses that have coughed up a lot more money. Homeowners are actually safer from foreclosures when they OWE MORE money to the bank.When homeowners OWE MORE to the bank, they actually make themselves less of a target and are much safer.

The prime example of this is the Hilton Hotel empire. During the Great Depression, when homes were being foreclosed on left and right, the Hiltons did not have one property foreclosed on even though they fell behind in the payments several times. Basically, since they owed so much money (and still do since they never pay off their properties) they made sure that the banks would not target them.

Financial advisors often tell their clients to go this route and I have no idea why. They know that the banks first target those that have coughed up a lot more money. They also are costing their clients and themselves a ton of lost profit because of the time value of money which I will explain now.

Everyone knows that money was worth a lot more when they were younger and that it is now worth less. In 30 years time, using the mortgage payment example above, when the last mortgage payment is due, that $1074 payment will be only worth about $437 today.

A dollar now is always better than a dollar in a year's time, or in 10 year's time.

So, in our example, how does the time value of money affect everything?

You cannot simply subtract the mortgage interest amount for a 20 year mortgage from the interest on a 30 year mortgage. To truly determine the best choice, you need to calculate the "Present Value" of each mortgage option.

The Present Value of a 30 year mortgage payment of $1074 at a 5% interest rate is $200,066.

The Present Value of a 20 year mortgage with a mortgage payment of $1320 at a 5% interest rate is $200,066.

Both are equal.

The $69,756 "savings" in the interest rate is really just the effect of adding the extra $246 a month into the repayments - in fact, that $246 a month adds up to $59,040 over 20 years.

On the other hand, what would happen if you took that same $246 each month and invested it elsewhere?

If you could get an average return of 10%, after 20 years you would have $186,804 (Note: the S&P 500 has averaged 10.83% over the last 50 years and would make an S&P 500 Index Fund a safe yet powerful choice.) With inflation at 3%, that would be worth $102,597 in today's money.

Now let's ask the question we asked once before to get even more answers. Why would the banks recommend that you pay off your mortgage quickly? Surely the longer the income stream lasts, the better, right?

The banks love being able to prove (and make it seem like they are only doing it for your benefit) that their recommendations will "save you money". But in reality, the banks really understand the time value of money. The banks know that $246 today is worth a lot more now than it will be in 20 years.

There are some good arguments for paying off your mortgage faster like building your equity. But you should understand that every dollar you give the bank now is a dollar that you can't invest.

Giving your money to the bank to avoid forking out 5% interest means that you can't use that money to earn 10% or 12% or 15% somewhere else. I put my clients into wealth building mortgages every single day that actually enable them to pay off their house in about 14.5 years and walk away with about $60,000 extra for every $100,000 that they initially borrowed!

Finally, I want to dispel a myth that many people have about the wealthy. Most people believe that wealthy people own their homes completely and do not have mortgages. The fact of the matter is that most do not own their homes free and clear because they understand that their money can make them a lot more money in other investments rather than sitting in the walls of their homes. Bill Gates took out a mortgage for his new home. The Home Depot doesn't own any of the land or buildings that they use. Why should you pay off your house?

Of course the title of this article talks about actually decreasing your monthly mortgage payment while building wealth at the same time and I would love to show you how to do exactly that. If you would like to know how to cut your monthly mortgage payment while at the same time build your wealth then please be sure to contact me.