Leveraging yourself by means of putting little or nothing down on your mortgage is not a new concept, but over the past couple of years it's morphed itself away from those who don't have any down payment money or for those qualified for a VA loan -- to those who have down payment money but don't want to use it.

They want to invest it instead in things such as stocks or mutual funds or something similar. Books touting this new idea seem to sprouting up like mushrooms, with perhaps the first relevant book on the topic was one written by Doug Andrew called, "Missed Fortune 101" (Business Plus 2005), and tells people how they shouldn't put anything down and provides a path to wealth. Doug says you can do this by taking the money you would have otherwise used as down payment and invest those same funds somewhere else.

There's even a formula that shows at what point a down payment-turned-investment would surpass the original mortgage in terms of value. It's a well-written book and makes a lot of sense. The math always works when you compare investing money and compound interest and such and had been so popular it has spawned other books just hitting bookshelves promoting the same idea just in different formats.

There are even special courses that mortgage loan officers can spend money on to learn how they work and how to present them to their clients. Again, it can make for an impressive presentation and makes the loan office appear to be more financially "savvy" than their competitors.

I agree with the concept, but I couldn't disagree more with the author's assertion that this program works for everybody, because two key components of this mortgage strategy are:

1. No Money Down

2. Payment Option ARMs

Heard those terms lately? Lenders over the past couple of years have pushed no money down loans as ways to get people into homes that otherwise wouldn't qualify. Lenders also have pushed Payment Option ARMs as a way to help people feel more comfortable with mortgage payments each month.

As in 1 percent interest and negative amortization.

These books teach people to pay an interest-only payment or a low "pay" rate of 1 percent or so instead of the fully-indexed payment where part of the house payment goes to the principal and part goes to interest. The difference between the interest only and a fully amortized one should go to a mutual fund.

It works out okay if the stars are aligned correctly but sometimes they aren't. As in right now. If people in fact put their money in a liquid investment and if they get in trouble they can always tap into that money to help out with bills and stuff.

But what if they don't have the discipline to do that each and every month? And what if they have to pull some money out of their original investment? Or worse, what if they never had an original investment in the first place?

And what if they had to refinance to avoid a hybrid reset but couldn't because ... (drum roll, please) ... there was no equity in the property?

Using your mortgage as a financial planning tool is a good thing, please don't get me wrong here. But this program is not for everybody by any stretch. They're for those who follow the plan exactly. But for those who can't, for whatever reason, could find themselves in some trouble.

Published: November 30, 2007

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, a veteran Mortgage Banker, successful Real Estate Consultant and author of Your Guide to VA Loans, Mortgages 101: Quick Answers to Over 250 Critical Questions About Your Home Loan, Who Says You Can't Buy a Home!, and Mortgage Confidential: What You Need to Know That Your Lender Won't Tell You, is a former columnist and Contributing Editor with San Diego-based Mortgage Originator Magazine. Reed is President of CD Reed Mortgage Bankers, Austin, TX and is a Past President of the Austin Mortgage Bankers Association.