Did You Know that Mortgage means "Death Pledge" ?
We all know a Mortgage is loan we take out to pay our house, yada, yada... However, what about the origin of the word itself? The word mortgage is composed of two parts:
Mort - from the French meaning "Death"
Gage - from Old English meaning "Pledge"
When translated into modern English, the word literally means "death pledge". This may sound pretty terrifying, and it's enough for people who want to invest in real estate to be swayed and sent running for the hills! But in fact, the word mortgage and the association with 'death pledge' has a historical backing that is rooted in history and should not be taken at face value as a reason to avoid investing and building your wealth.
The Origin of Mortgages
The origin of the so called "death pledge" comes from the olden days. Sons of noble men who could not afford the money for a house would borrow money and obtain a loan and pledge to repay the debt back when their father died and they received their inheritance. The etymology of the word "mortgage" also goes back to the first mortgage ever recorded, in England in 1190. Common English law gave protections to the lender of the mortgage loan and was known as a Living Pledge where possessions were pledged while living until the debt was officially repaid.
The origins of the Death Pledge, or mortgage, is the pledge of repayment upon the death of a parent and the arrival of large sums of money as part of inheritance. Another interpretation is that the death part of mortgage refers to the debt dying when the creditor has been paid in full for the mortgage.
The Modern Mortgage
These days, a mortgage is basically a contract or term related to buying a property. The mortgage is the amount of time before the home is totally paid off as well as inclusive of the rates, principal, and interest that comes with the money you were loaned by the bank in order to pay for the house. A mortgage and having debt can be good or bad, and is not inherently a negative thing. If you can't make your mortgage payment and continue to be unable to make it, you risk losing your home. If you are in this situation, you can save yourself from foreclosure(contact a lender or mortgage broker to learn more). However, having a mortgage can also just be a necessary requirement that can be used to leverage other investments as well, something that can be good if used wisely, but negative if used for foolish purposes. You don't want to ruin your credit because you leveraged your mortgage to buy a fancier car, for instance.
The Difference Between Good Debt and Bad Debt
Investing in a home or real estate can be fantastic if you have the money to do so. If you're not a slave to your monthly payments and have enough income or savings to afford a mortgage, it can be very positive. You want to make sure you can make your monthly payments, and if you can't, you might want to consider purchasing a smaller house.
Robert Kiyosaki said that real estate investing, even small scale, is a "tried and true means of building an individual's cash flow and wealth". If you are leveraging your debt/mortgage in order to make more investments and are making money off your investment already(through renting out, etc.), you can use your debt to your advantage and generate even more money. In this instance, leveraging your debt can be very liberating for those who know how to use it correctly!
At the end of the day, when investing in real estate, your own home, a house to rent out, you can use loans and debt to your advantage. Property, mortgages, and real estate don't have to be a burden. They can be a real asset when it comes to your total wealth. If you can invest in a house that pays you 15% interest, and you take on a debt for 5%, that is a profit of 10%. When you keep your eye on the prize and stay on top of your investments, you are guaranteed to reap the rewards.