|
|
Can you spot the $294,000 difference between these homes?
|
 |
Did you spot the difference? Let me give you a hint: it's not the landscaping, the location, or the gold-plated fixtures in the master bathroom. I fact, it's not anything you'd ever notice with the naked eye. The $294,000 difference is in how much buyers unwittingly may pay for this home if they aren't careful.
|
| |
I recently met with a gentleman who was referred to me by his financial advisor for a consultation on how to best structure his mortgage in preparation for retirement. He wanted to retire in 13 years; he had refinanced his mortgage last year to a 15-year fixed rate loan, taking advantage of the low rates; and he wanted to own his home free and clear by the time he retired.
|
| |
Most home owners have the misconception that the wisest method to accelerate the payoff of their home is to simply pay extra principal payments to their mortgage by utilizing a 15-year mortgage, bi-weekly payments, or even by adding an extra $100 to their payments each month. In actuality, none of these methods usually prove to be the wisest method to accomplish a "free and clear" home.
|
| |
You can accumulate sufficient cash in a conservative tax-preferred mortgage acceleration plan to pay off a home just as soon, or sooner, than by utilizing the methods described above, plus you will have the following advantages:
- Maintain flexibility, liquidity, and safety of principal by allowing the equity in your home to grow in a separate side fund where it is accessible in case of emergency, temporary disability, or unemployment.
- Maximize the only real tax-deductible interest allowed by keeping the loan balance as high as possible until you have the cash accumulated to pay off your home in a lump sum.
|
| |
Let's look at our example from above...by strategically refinancing and taking advantage of the tax deductibility of mortgage interest, we were able to accumulate enough money (at only a 6% rate of return) to pay off the home in 8 1/2 years instead of 14. If the gentleman continued to invest his monthly savings he would have $294,000 more than the balance of his mortgage at the time he was ready to retire.
|
| |
Don't be fooled into giving up the liquidity, safety, and potential rate of return on your money by giving it to your mortgage company. Get the facts and structure your mortgage to give you the greatest advantage from the start.
|
|
|
|
|
|
|
