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Mortgage Mistakes and Misconceptions “ How to Leverage Your Home Equity  For More Wealth” Presented By:  Your Name Mortgag...
Mortgage History Quiz <ul><li>What was the Typical Cost of a New Home in 1920? </li></ul><ul><li>Answer:  $5,000 </li></ul...
Why People Pay Off Their Mortgage <ul><li>Stock Market Crash 1929 </li></ul><ul><li>Margin Calls ($10 to Borrow $100) </li...
Why People Should Not Fear Mortgages <ul><li>Consumers can No Longer Purchase Stock with 10% Down </li></ul><ul><li>Banks ...
<ul><li>Material presented regarding use of home equity and additional mortgage obligations are  not  appropriate for ever...
Why do Consumers Buy Homes? <ul><li>Top 3 Reasons that consumers cited for buying a home? </li></ul>*2003 National Housing...
What Other Reasons Do People Own Homes? <ul><li>It provides for Basic Human Needs </li></ul><ul><ul><li>Shelter, Comfort, ...
American's Assets 67% of American Home Owners have more  Equity in their Home, than in all other investments SAMPLE. NOT F...
What makes up a Quality Investment? <ul><li>Investments are compared using these simple criteria: </li></ul><ul><li>Rate o...
What makes up a Quality Investment? (continued) <ul><li>Investments are compared using these simple criteria: </li></ul><u...
Important Asset Question <ul><li>What percent of your assets would You typically invest in something that is: </li></ul><u...
Surprise Answer <ul><li>This investment is your home equity! </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
Safety Definition <ul><li>Basic Definition of Safety </li></ul><ul><li>Guaranteed, Insured, or totally protected from Vola...
How Safe is Your House? <ul><li>These are 3 ways you can lose the value of the equity in your home: </li></ul><ul><li>Redu...
How Safe is Your House? <ul><li>While a home is considered a Safe Asset a </li></ul><ul><li>“ Market Bubble” or change in ...
Diversification <ul><li>You should never have all your EGGS in one basket!! </li></ul><ul><li>Too much equity in your home...
How Liquid are Your Assets? <ul><li>How quickly can you access your money? </li></ul><ul><li>Cash </li></ul><ul><li>Same d...
Home Equity Liquidity <ul><li>Home equity is typically the least liquid investment you have and the only investment that r...
Problems With Extra Pre-Payments <ul><li>Assume your monthly payment is $3,000 </li></ul><ul><li>You make an extra payment...
You Become Disabled or Unemployed <ul><li>Does the Bank care that you’ve been making extra payments for 3 years? </li></ul...
Liquidity <ul><li>QUESTION: </li></ul><ul><li>How important is use and control of the wealth in your home? </li></ul><ul><...
Rate of Return <ul><li>What if you learned that a portion of your wealth was earning an annual rate of return of 0% and wo...
Equity in your Home <ul><li>The equity in your home always appreciates at a rate of 0%. </li></ul><ul><li>Equity in your H...
One Asset vs. Two Assets SAMPLE. NOT FOR USE BY A PLANNERc $100,000 Value of Current Equity in Home 0% Rate of Return on t...
One Asset vs. Two Assets SAMPLE. NOT FOR USE BY A PLANNERc $100,000 Conservative Equity Growth Account 5% Rate of Return $...
One Asset vs. Two Asset Comparison SAMPLE. NOT FOR USE BY A PLANNERc $100,000 Value of Equity in 10 years $425,778 Total N...
Immediately Double your Accumulating Assets <ul><li>Asset-Home </li></ul><ul><li>  $200,000 </li></ul><ul><li>No Mortgage ...
How Will This Impact Your Growth? <ul><li>Asset-Home 1   Asset- Safe Investment 2 </li></ul><ul><li>    $200,000  $200,000...
What About the Payment? <ul><li>$200,000 Interest-Only Mortgage at 7% </li></ul><ul><li>$14,000 yearly interest </li></ul>...
Important Question <ul><li>If the government said they would pay up to 35% of your monthly mortgage payment, would you tak...
Tax Break  <ul><li>Mortgage interest on first mortgages is deductible on loans up to $1,000,000 and on a second mortgage o...
Free Government Money <ul><li>$1,500 Monthly Mortgage Payment </li></ul><ul><li>You Really Pay $1,080 </li></ul><ul><li>Go...
Does your Home Equity  Pass the Test? <ul><li>Test Results </li></ul><ul><li>7 No’s </li></ul><ul><li>1 Yes </li></ul><ul>...
Benefits of Separating Your Equity from Your Home <ul><li>Increase Liquidity  – Have access to the money </li></ul><ul><li...
Is Your Home Creating Wealth? <ul><li>Currently in the US, 30% of US homes have no mortgage, with 65% of those homes are o...
Why is This Important? <ul><li>The average retirement age in the U.S. moved from 66.9 to 62.7 between 1990 and 2000, dropp...
Where Do You Find the Money? <ul><li>The longer you can put money to work for you the more dramatically it can compound. <...
Retirement Account Fallacies <ul><li>IRA’s and 401(k)’s are NOT Financially Beneficial to Your Retirement </li></ul><ul><l...
Retirement Account Fallacies <ul><li>In the FIRST two years of retirement, every dollar of taxes saved is paid back. </li>...
Predictability Game <ul><li>Pick a number between 1 and 10. </li></ul><ul><li>Double it. </li></ul><ul><li>Add 8 to the to...
Predictability Game <ul><li>You have selected a </li></ul><ul><li>Grey Elephant from Denmark ! </li></ul><ul><li>This is a...
Reverse Tax Planning <ul><li>Common Advice from Financial Planners </li></ul><ul><ul><li>PAY OFF YOUR HOME AS QUICK AS POS...
Reverse Tax Planning <ul><li>Let’s say you follow that advice, what happens during your retirement years? </li></ul><ul><u...
Retirement Wealth <ul><li>Your Mortgage Can Be Your Best Ally in Creating Maximum Wealth for Your  Retirement! </li></ul>S...
Use Your Mortgage to  Make a Million Dollars <ul><li>Borrowing at 7.5% </li></ul><ul><li>(tax-deductible*) </li></ul>Year ...
Benefits of Investing Your Equity Assumptions:  Initial Home Value - $200,000  Initial Mortgage Balance: $100,000  Max LTV...
Benefits of Investing Your Equity (continued) <ul><li>Notes from the Previous Chart: </li></ul><ul><li>Equity up to 80% is...
Mortgage Basics <ul><li>80% LTV Financing Down to a 500 Credit Score on a Refinance, 620 on a 2 nd  Mortgage </li></ul><ul...
Debt Consolidation Example <ul><li>Current Mortgage Balance:  $100,000 </li></ul><ul><li>Interest Rate:  6% </li></ul><ul>...
Suitable Investments <ul><li>Investment Criteria: </li></ul><ul><li>Safety of principal (don’t want to risk the money) </l...
Benefits of Free Consultation <ul><li>Avoid Common Mortgage Mistakes </li></ul><ul><li>Increase Your Tax Deductions, Safet...
Get More Information <ul><li>The mortgage planner who you would be working with would like to email you a free report that...
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  1. 1. Mortgage Mistakes and Misconceptions “ How to Leverage Your Home Equity For More Wealth” Presented By: Your Name Mortgage Planner Company Name Phone Number Your Name Financial Planner Company Name Phone Number SAMPLE. NOT FOR USE BY A PLANNERc
  2. 2. Mortgage History Quiz <ul><li>What was the Typical Cost of a New Home in 1920? </li></ul><ul><li>Answer: $5,000 </li></ul><ul><li>What was the Typical Annual Income in 1920? </li></ul><ul><li>Answer: $1,434 </li></ul><ul><li>What Provision was in Loans that Motivated all People to Pay their House off as Quickly as Possible? </li></ul><ul><li>Answer: Banks had the Option to Demand Balance Repayment at anytime </li></ul><ul><li>What happened on October 29,1929? </li></ul><ul><li>Answer: Stock Market Crash </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  3. 3. Why People Pay Off Their Mortgage <ul><li>Stock Market Crash 1929 </li></ul><ul><li>Margin Calls ($10 to Borrow $100) </li></ul><ul><li>Run on the Bank </li></ul><ul><li>Banks Called Loans </li></ul><ul><li>Mortgage Holders Lost Homes </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  4. 4. Why People Should Not Fear Mortgages <ul><li>Consumers can No Longer Purchase Stock with 10% Down </li></ul><ul><li>Banks are no longer underwriting stock </li></ul><ul><li>Banks can no longer cancel mortgages </li></ul><ul><li>FDIC was created to protect consumers </li></ul><ul><li>Banks now have access to unlimited cash through the secondary market </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  5. 5. <ul><li>Material presented regarding use of home equity and additional mortgage obligations are not appropriate for everyone. Loan proceeds used for direct investment purposes should be used only when clearly suitable. Discuss all investment opportunities with your financial planner based on your risk tolerance. Only borrow an amount that you can afford to pay from funds you have available to invest. </li></ul>Important Information- Disclosure SAMPLE. NOT FOR USE BY A PLANNERc
  6. 6. Why do Consumers Buy Homes? <ul><li>Top 3 Reasons that consumers cited for buying a home? </li></ul>*2003 National Housing Survey – Fannie Mae – page 4 #1 Long Term Financial Investment 84% #2 Feeling of Ownership 74% #3 Neighborhood I Like 67% SAMPLE. NOT FOR USE BY A PLANNERc
  7. 7. What Other Reasons Do People Own Homes? <ul><li>It provides for Basic Human Needs </li></ul><ul><ul><li>Shelter, Comfort, Security, and Privacy </li></ul></ul><ul><li>In Addition to </li></ul><ul><ul><li>Potential Tax Savings </li></ul></ul><ul><ul><li>Potential Leveraged Asset Growth </li></ul></ul><ul><ul><li>Inflation Protection with Locked in Payments </li></ul></ul><ul><ul><li>Establishes Credit History </li></ul></ul><ul><ul><li>Forced Savings </li></ul></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  8. 8. American's Assets 67% of American Home Owners have more Equity in their Home, than in all other investments SAMPLE. NOT FOR USE BY A PLANNERc
  9. 9. What makes up a Quality Investment? <ul><li>Investments are compared using these simple criteria: </li></ul><ul><li>Rate of Return- What do You Earn? </li></ul><ul><li>Safety – Potential to lose your principal? </li></ul><ul><li>Liquidity - Ability to use and control your Investment? </li></ul><ul><li>Tax Free or Tax Advantage- Ability to realize gains on your investment without paying taxes? </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  10. 10. What makes up a Quality Investment? (continued) <ul><li>Investments are compared using these simple criteria: </li></ul><ul><li>Retirement Income- Ability to Generate more Income when you Need It? </li></ul><ul><li>Legacy For Family- Can You Provide for Them After You are Gone? </li></ul><ul><li>Diversified- Are all Your Eggs in One Basket? </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  11. 11. Important Asset Question <ul><li>What percent of your assets would You typically invest in something that is: </li></ul><ul><li>Potentially Unsafe </li></ul><ul><li>Partially to Totally Illiquid </li></ul><ul><li>Guarantees a 0% Annual Return </li></ul><ul><li>Can’t Provide Income </li></ul><ul><li>Is Not Diversified </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  12. 12. Surprise Answer <ul><li>This investment is your home equity! </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  13. 13. Safety Definition <ul><li>Basic Definition of Safety </li></ul><ul><li>Guaranteed, Insured, or totally protected from Volatility. </li></ul><ul><li>More Flexible Definition </li></ul><ul><li>Minimizing Risk or Potential for loss </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  14. 14. How Safe is Your House? <ul><li>These are 3 ways you can lose the value of the equity in your home: </li></ul><ul><li>Reduction in value due to economic or business changes </li></ul><ul><li>Foreclosure for failure to make mortgage or tax payments </li></ul><ul><li>Lawsuit where your personal assets are attached </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  15. 15. How Safe is Your House? <ul><li>While a home is considered a Safe Asset a </li></ul><ul><li>“ Market Bubble” or change in local economic outlook could reduce or eliminate: </li></ul><ul><li>Price Appreciation (main source of equity growth) </li></ul><ul><li>Current Equity (can’t borrow if the equity is not there) </li></ul><ul><li>Source of Down Payment (for future purchase) </li></ul><ul><li>This loss occurs if you sold the house during a </li></ul><ul><li>depreciated market </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  16. 16. Diversification <ul><li>You should never have all your EGGS in one basket!! </li></ul><ul><li>Too much equity in your home doesn’t allow you to be properly diversified!! </li></ul><ul><li>QUESTION: </li></ul><ul><li>How important is it to you to protect your wealth in your home? </li></ul><ul><li>Have you considered the safety of the wealth in your home before today? </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  17. 17. How Liquid are Your Assets? <ul><li>How quickly can you access your money? </li></ul><ul><li>Cash </li></ul><ul><li>Same day access </li></ul><ul><li>Bonds/Stocks/Mutual Funds </li></ul><ul><li>Same day access </li></ul><ul><li>Home Equity </li></ul><ul><li>Refinance: 30-90 days (assuming that you qualify) </li></ul><ul><li>Sell the Home: 60 – 180+ days </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  18. 18. Home Equity Liquidity <ul><li>Home equity is typically the least liquid investment you have and the only investment that requires you to qualify to access your wealth. </li></ul><ul><li>To get your money, you have to prove that you DON’T need it! </li></ul><ul><li>Credit, employment, current debt load and closing costs all affect your ability to get to your equity. </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  19. 19. Problems With Extra Pre-Payments <ul><li>Assume your monthly payment is $3,000 </li></ul><ul><li>You make an extra payment of $ 300 a month every month = $3,600 </li></ul><ul><li>OR </li></ul><ul><li>You make a $300 deposit into the savings account each month = $3,600 </li></ul><ul><li>After 5 years you have $18,000 in equity or savings </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  20. 20. You Become Disabled or Unemployed <ul><li>Does the Bank care that you’ve been making extra payments for 3 years? </li></ul><ul><li>NO, the Bank only cares about you making the next month’s payment!! You STILL need to come up with $3,000! </li></ul><ul><li>Had you saved the money instead of building equity, you could make payments for over 6 months </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  21. 21. Liquidity <ul><li>QUESTION: </li></ul><ul><li>How important is use and control of the wealth in your home? </li></ul><ul><li>Have you considered liquidity of the wealth in your home before today? </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  22. 22. Rate of Return <ul><li>What if you learned that a portion of your wealth was earning an annual rate of return of 0% and wouldn’t be changing throughout your lifetime? </li></ul><ul><li>Would that be a major concern? </li></ul><ul><li>Would you make an investment that guaranteed you a 0% return? </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  23. 23. Equity in your Home <ul><li>The equity in your home always appreciates at a rate of 0%. </li></ul><ul><li>Equity in your Home only increases through: </li></ul><ul><ul><li>Principal Repayment </li></ul></ul><ul><ul><li>Property Appreciation </li></ul></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  24. 24. One Asset vs. Two Assets SAMPLE. NOT FOR USE BY A PLANNERc $100,000 Value of Current Equity in Home 0% Rate of Return on that Equity $100,000 Value of that Equity in 10 years $325,778 Home Value in 10 years 5% Appreciation by Year* $200,000 Home Value One Asset (Traditional Method)
  25. 25. One Asset vs. Two Assets SAMPLE. NOT FOR USE BY A PLANNERc $100,000 Conservative Equity Growth Account 5% Rate of Return $162,889 Value of Equity in 10 years $325,778 Home Value in 10 years 5% Appreciation by Year* $200,000 Home Value Two Assets
  26. 26. One Asset vs. Two Asset Comparison SAMPLE. NOT FOR USE BY A PLANNERc $100,000 Value of Equity in 10 years $425,778 Total Net Worth $100,000 Value of the Equity in Home 0% Rate of Return $325,778 Home Value 5% Appreciation by Year* $200,000 Home Value One Asset $162,889 Value of Equity in 10 years $100,000 Conservative Growth Account 5% Rate of Return $488,664 Total Net Worth $325,778 Home Value 5% Appreciation by Year* $200,000 Home Value Two Assets
  27. 27. Immediately Double your Accumulating Assets <ul><li>Asset-Home </li></ul><ul><li> $200,000 </li></ul><ul><li>No Mortgage </li></ul><ul><li>- Or - </li></ul><ul><li>Asset-Home Asset- Safe Investment </li></ul><ul><li> $200,000 $200,000 </li></ul><ul><li>Mortgaged </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  28. 28. How Will This Impact Your Growth? <ul><li>Asset-Home 1 Asset- Safe Investment 2 </li></ul><ul><li> $200,000 $200,000 </li></ul><ul><li> + 7% Appreciation + 7% Growth $214,000 $214,000 </li></ul><ul><li>Increase in Assets </li></ul><ul><li> $28,000 </li></ul><ul><li>1 Home is worth $200,000, with no mortgage </li></ul><ul><li>2 Borrow the $200,000, invest it at 7% </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  29. 29. What About the Payment? <ul><li>$200,000 Interest-Only Mortgage at 7% </li></ul><ul><li>$14,000 yearly interest </li></ul><ul><li>28% tax bracket </li></ul><ul><li>$3,920 taxes saved </li></ul><ul><li>$10,080 net interest cost </li></ul><ul><li>End of Year Results </li></ul><ul><li>Home Appreciates 7% $14,000 </li></ul><ul><li>Safe Investment earns 7% $14,000 </li></ul><ul><li>Assets Increased total of $28,000 </li></ul><ul><li>Less net interest cost $10,080 </li></ul><ul><li>Profit by Investing Home Equity $17,920 </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  30. 30. Important Question <ul><li>If the government said they would pay up to 35% of your monthly mortgage payment, would you take full advantage of it? </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  31. 31. Tax Break <ul><li>Mortgage interest on first mortgages is deductible on loans up to $1,000,000 and on a second mortgage or home equity line of credit up to $100,000. </li></ul><ul><li>You can create tax savings on a combined total of $374,000 in a 34% tax bracket. </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  32. 32. Free Government Money <ul><li>$1,500 Monthly Mortgage Payment </li></ul><ul><li>You Really Pay $1,080 </li></ul><ul><li>Government Pays $420* </li></ul><ul><li>You Receive $5,040 a Year From the IRS (assuming payment is interest)!! </li></ul><ul><li>$151,200 over 30 years </li></ul>*Assuming 28% tax bracket SAMPLE. NOT FOR USE BY A PLANNERc
  33. 33. Does your Home Equity Pass the Test? <ul><li>Test Results </li></ul><ul><li>7 No’s </li></ul><ul><li>1 Yes </li></ul><ul><li>Score- Poor Investment </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc No Maximum net Retirement Income (after taxes paid) No Diversified No Upon Death- Money for Beneficiaries No Retirement Income for Life Yes Tax-Free or Tax-Advantaged No Earn Interest Every Year No Safety (No Risk to Principal) No Liquidity
  34. 34. Benefits of Separating Your Equity from Your Home <ul><li>Increase Liquidity – Have access to the money </li></ul><ul><li>Enhance the Safety – No longer affected by any “housing bubble”, or by loss of equity from foreclosure. </li></ul><ul><li>Protect Yourself from Disability and Unemployment – You have cash to make the payments if you need it. </li></ul><ul><li>Become More Diversified – Put your eggs into more than one basket. </li></ul><ul><li>Increase Your Rate of Return – Equity has a 0% return. </li></ul><ul><li>Maximize Your Tax Deductions – Payments on the investment are tax-deductible. </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  35. 35. Is Your Home Creating Wealth? <ul><li>Currently in the US, 30% of US homes have no mortgage, with 65% of those homes are owned by Seniors over the age of 65. </li></ul><ul><li>The average Senior in the US today has combined household income of $21,450 per year. </li></ul><ul><li>They’ve accomplished the goal of having the home paid for, but at what price? </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  36. 36. Why is This Important? <ul><li>The average retirement age in the U.S. moved from 66.9 to 62.7 between 1990 and 2000, dropping an average of 5 months per year </li></ul><ul><li>The average life expectancy in the U.S. is currently increasing by an average of 4 months per year since 1970. </li></ul><ul><li>Have you even considered outliving your retirement savings? </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  37. 37. Where Do You Find the Money? <ul><li>The longer you can put money to work for you the more dramatically it can compound. </li></ul><ul><li>The difficulty often comes in finding additional money to save, and maintaining the discipline to continue saving. </li></ul><ul><li>By consolidating long-term debts in a new mortgage, you can often find the money to cover the payments on your equity investment. </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  38. 38. Retirement Account Fallacies <ul><li>IRA’s and 401(k)’s are NOT Financially Beneficial to Your Retirement </li></ul><ul><li>Example: </li></ul><ul><li>Save $4,000 per year for 30 years: $120,000 </li></ul><ul><li>Income Tax Bracket: 34% </li></ul><ul><li>Annual Taxes Deferred: $1,360 </li></ul><ul><li>30 Year Tax Savings: $40,800 </li></ul><ul><li>$4,000 / year @ 10%/yr for 30 years: $723,774 </li></ul><ul><li>Withdrawal 10% per year: $72,000 </li></ul><ul><li>Subtract 34% taxes: $24,000 </li></ul><ul><li>From age 65 to 85, $500,000 in taxes are paid vs. $40,800 saved during your contribution years . </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  39. 39. Retirement Account Fallacies <ul><li>In the FIRST two years of retirement, every dollar of taxes saved is paid back. </li></ul><ul><li>A person living a normal life expectancy will pay over 10 times the taxes on a qualified retirement plan during their retirement years than the taxes saved during their contribution years </li></ul><ul><li>Whose retirement are we planning? Ours or Uncle Sam’s? </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  40. 40. Predictability Game <ul><li>Pick a number between 1 and 10. </li></ul><ul><li>Double it. </li></ul><ul><li>Add 8 to the total. </li></ul><ul><li>Divide it by 2. </li></ul><ul><li>Subtract your original number. </li></ul><ul><li>If 1=A, 2=B, 3=C, 4=D, 5=E, 6=F, 7=G, 8=H, 9=I and 10=J, think of a country that begins with the letter next to the number you are left with. </li></ul><ul><li>Take the next letter in the alphabet and think of an animal that begins with that letter. </li></ul><ul><li>Now think of a color that is usually associated with that animal. </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  41. 41. Predictability Game <ul><li>You have selected a </li></ul><ul><li>Grey Elephant from Denmark ! </li></ul><ul><li>This is an example of predictability. The government can predict how much money we will be paying in taxes in our retirement years. We need a way to out-smart them! </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  42. 42. Reverse Tax Planning <ul><li>Common Advice from Financial Planners </li></ul><ul><ul><li>PAY OFF YOUR HOME AS QUICK AS POSSIBLE </li></ul></ul><ul><ul><ul><li>Extra Payments </li></ul></ul></ul><ul><ul><ul><li>Bi-weekly Payments </li></ul></ul></ul><ul><ul><li>Maximize IRA contributions </li></ul></ul><ul><ul><li>Are they really helping you plan for retirement? </li></ul></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  43. 43. Reverse Tax Planning <ul><li>Let’s say you follow that advice, what happens during your retirement years? </li></ul><ul><ul><li>By paying off your mortgage, you have eliminated your biggest tax deduction, mortgage interest </li></ul></ul><ul><ul><li>Now, all of your income from your qualified plan is 100% taxable </li></ul></ul><ul><li>You have created a tax situation that is the absolute least favorable situation!! </li></ul><ul><ul><li>100% taxable income, no deductions </li></ul></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  44. 44. Retirement Wealth <ul><li>Your Mortgage Can Be Your Best Ally in Creating Maximum Wealth for Your Retirement! </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  45. 45. Use Your Mortgage to Make a Million Dollars <ul><li>Borrowing at 7.5% </li></ul><ul><li>(tax-deductible*) </li></ul>Year $160,000 in Equity 1 5 10 15 20 25 30 $7,920 $39,600 $79,200 $118,800 $158,400 $198,000 $237,600 Investing at 7.5% (compounding tax free) $12,000 $69,701 $169,765 $313,420 $519,656 $815,734 $1,240,793 Difference $4,080 $30,101 $90,565 $194,620 $361,256 $617,734 $1,003,193 *Assuming 34% tax bracket SAMPLE. NOT FOR USE BY A PLANNERc
  46. 46. Benefits of Investing Your Equity Assumptions: Initial Home Value - $200,000 Initial Mortgage Balance: $100,000 Max LTV: 80% Mortgage Interest Rate: 7% Investment Rate: 8.75% Tax Bracket: 28% Home Appreciation Rate: 5% Interest Payment is after-tax payment. SAMPLE. NOT FOR USE BY A PLANNERc
  47. 47. Benefits of Investing Your Equity (continued) <ul><li>Notes from the Previous Chart: </li></ul><ul><li>Equity up to 80% is pulled out from the house, valued at $200,000. This keeps the interest cost as low as possible. </li></ul><ul><li>The outstanding mortgage balance is subtracted from the amount available to invest. </li></ul><ul><li>The funds are invested in a tax-advantaged account earning an average of 8.75% / year. </li></ul><ul><li>Every three years, accumulated equity is pulled out and added to the portfolio. </li></ul><ul><li>The Investment Gain is the value of the portfolio less the outstanding borrowed money. </li></ul><ul><li>The Invest the Cash column reflect the value of investing the after-tax monthly interest payments on the borrowed money instead of using the money to pay back the loan. </li></ul><ul><li>The value of the home is presumed to go up 5% per year. </li></ul><ul><li>The Net Gain column reflects the difference you earned by borrowing and investing your equity instead of investing the after-tax interest payments directly. </li></ul><ul><li>On a $300,000 home with a $100,000 outstanding mortgage, the net gain after 20 years is $381,995 instead of $208,299. </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  48. 48. Mortgage Basics <ul><li>80% LTV Financing Down to a 500 Credit Score on a Refinance, 620 on a 2 nd Mortgage </li></ul><ul><li>3 Yr, 5 Yr, and 10 Yr Fixed Interest Rates </li></ul><ul><li>Self-Employed Borrowers Accepted </li></ul><ul><li>Stated Income Programs Available </li></ul><ul><li>Closing Costs Average 3% of the Loan Amount </li></ul><ul><li>Debt Consolidation Program Can Save You Hundreds of Dollars Per Month </li></ul><ul><li>This Money Can be Used for Your Investment Program </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  49. 49. Debt Consolidation Example <ul><li>Current Mortgage Balance: $100,000 </li></ul><ul><li>Interest Rate: 6% </li></ul><ul><li>Monthly Payment (P/I): $600 </li></ul><ul><li>Credit Card Debt: $25,000 </li></ul><ul><li>Monthly Payment: $750 </li></ul><ul><li>Tax Bracket: 28% </li></ul><ul><li>New Mortgage: $128,000 </li></ul><ul><li>New Monthly Payment @ 7%, interest-only: $747 </li></ul><ul><li>After-Tax Monthly Payment: $538 </li></ul><ul><li>Monthly Savings: $812 </li></ul><ul><li>Investment Equity This Supports: $139,050 (@ 7%, interest-only) </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  50. 50. Suitable Investments <ul><li>Investment Criteria: </li></ul><ul><li>Safety of principal (don’t want to risk the money) </li></ul><ul><li>Liquidity of funds (need access on short notice) </li></ul><ul><li>Investment return (need above market return) </li></ul><ul><li>Tax advantaged (let capital grow and be removed tax-free) </li></ul><ul><li>Your financial planner can discuss suitable investments that will earn you significantly more than the tax-deductible mortgage interest cost. </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  51. 51. Benefits of Free Consultation <ul><li>Avoid Common Mortgage Mistakes </li></ul><ul><li>Increase Your Tax Deductions, Safety, Liquidity and Return </li></ul><ul><li>Protect Yourself from Disability or Unemployment </li></ul><ul><li>The Fastest, Easiest and Smartest Way to become Mortgage Free </li></ul><ul><li>How to Increase Your Net Worth </li></ul><ul><li>How to Create Extraordinary Wealth </li></ul><ul><li>Overview of Suitable Investments for Your Home Equity </li></ul><ul><li>How to Create an Investment Account to Accumulate Money for Your Retirement Years </li></ul><ul><li>Make Sure Your Retirement is on Course </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc
  52. 52. Get More Information <ul><li>The mortgage planner who you would be working with would like to email you a free report that better explains how you can create wealth from your home equity. </li></ul><ul><li>You can also receive a free Excel spreadsheet file so you can work the numbers based on your home’s value, current mortgage balance, appreciation rate, tax bracket and interest rates </li></ul><ul><li>Simply send an email to: [email_address] or call Joseph Kamenar at 215-480-2737. </li></ul>SAMPLE. NOT FOR USE BY A PLANNERc

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