Is Mortgage Pay Off Costing You


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Is Mortgage Pay Off Costing You

  1. 1. ==== ====For more tips on Safe Mortgage Investing go ====Many Americans still believe that paying off your mortgage is the best thing you can do. After all,it is a guaranteed savings, right? Well, lets take a look at it further.Right now, there is a new craze in the mortgage industry, one that is being marketed heavily andis being presented as the best solution for you to pay off your mortgage in as little as 7 years. Butis this the best thing for you, or could it actually be costing you more money?Those that offer these programs have different names for them, Money Merge Accounts,Mortgage Accelerator, Homeownership Accelerator, etc. All are designed to take the typicalthought process of paying off your mortgage as quickly as possible and "sucking you in" tothinking this is the best solution for you. Also, many reps from United First Financial, and others,have used misleading information in order to further show their product is the only solution, sobeware.Now, these programs are not really bad programs, but they may actually be costing you moremoney over time. Here is a blog post you can use as a reference to learn more about a directcomparison.The truth is that paying off your mortgage could actually cost you more money over time, nomatter how you go about doing it. The time value of money and the ability to grow your moneythrough compounding interest, instead of paying off straight line interest, allows your mortgage towork for you as an integral part of your overall financial and investment plans. The difference canbe into the hundreds of thousands of dollars.In fact, a family who could easily afford a 15 year mortgage, but decides to use their mortgage asa financial tool instead, could actually pay off their mortgage faster using a 30-year interest-onlymortgage instead. Whats more impressive is that due to the time value of money, if they decidednot to pay off the mortgage as fast as possible, in 30 years they could have accrued enoughmoney to pay off the mortgage and still have nearly $400,000 more money than if they used the15-year mortgage, paid it off, and then invested every dollar they had originally sent to pay off themortgage. Please refer to this post for the comparison.What about those who are not in able to get a 15-year mortgage?Well, many Americans also have a reasonable amount of equity stored up in their homes, so theycould take advantage of other strategies. We could go into great detail about different strategies,but lets just look at this one. You could take out equity from their home and invest the money in asafe, conservative investment that can improve their liquidity, safety, and rate of return.
  2. 2. The example I will use is cashing out $100,000 of equity and investing it at the same rate as yourmortgage. For this example, I will use the rates as 7.0% and we assume you are in the 34% taxbracket. As the illustration shows, we will be highlighting the difference between the net cost andnet gains of the same $100,000, so the difference is pure profit.After the first year, the net cumulative cost of your mortgage would be $4,620. In the meantime,the net cumulative growth of your $100,000 would be $7,000, so you would already be ahead by$2,380.By the 10th year, your net cumulative cost of the mortgage would be $46,200, but yourinvestments would have grown by $96,715, so you would have gained $50,515 on your $100,000so far.About the author: Robert D. Ashby is President of Solid Rock Mortgage, a licensed MortgageBrokerage Business in the state of Florida. He has been in the financial services business since1997 and obtained his Series 6 and 63 Securities Licenses as well as Life and Health InsuranceLicenses in the state of Virginia. He moved to Florida in 2002 and decided to focus solely onmortgages, obtaining his Mortgage Broker License for Florida in 2003 and then opening SolidRock Mortgage in 2004. He has become Florida’s first Certified Mortgage Planning Specialistand Florida’s Debt and Equity Management Expert.Additionally, he has developed a unique process called MEDS (Managing Equity and DebtStrategically)™ that ensures the mortgage is properly integrated into the clients overall financialand investment plans.Article Source: ====For more tips on Safe Mortgage Investing go ====