When I first heard about this idea, I was flabbergasted.  Well, if you have been following my posts for the past months, you would know that I am somewhat averse to having any debt of any kind.  Combine that with my somehow OC personality, you can just imagine me wanting to pay off debts as soon as I humanly can.

Anyhow, I have some friends who happen to be financial consultants and over coffee one day we started talking about mortgages and loans in general.  I mentioned something about pre-terminating a loan I had because I had some extra cash to pay it off.  There was no pre-termination fee so I thought it was a great idea.

To my surprise, they advised against it.  When it comes to mortgages, they said, you would be better off not paying it all at once.  Why?  For example, you bought a house for £200,000 with a £100,000 mortgage.  Somewhere down the road the house would increase in value, let’s say by 10%.  That means you get a 10% profit plus you only put down £100,000.  Now, say you were to sell that house, you would definitely benefit from it.  The basic idea is using borrowed money to finance a purchase that will guarantee you high returns.

I see the logic behind the argument but deep inside me, I still feel that I would probably pay it off if I had the means to do so.  It is being stubborn, but I am sure I will come around one of these days.  What do you think?