Mortgage to pay – a strategy that could be your Worst Financial Move

So you hear all the time by financial experts, "Invest in your home. Extinguish your mortgage first. Equity Home is safe and liquid. Conventional wisdom tells us of your home is an advantage. Since you live in an apartment that is safe and the capital available. Pay off the mortgage as quickly as possible so they can avoid paying interest. Acceleration of payments.

Of course, we are here to challenge those assertions. Imagine I am your financial advisor. I have the investment opportunitiesLet me introduce you to. Let me tell you, after the "Properties".

-You can use the amount of monthly contributions and the length of time for contributions to continue.
-You may pay more than the minimum monthly contribution, but not less.
-If you try to pay less to maintain the financial institution in all contributions.
-Money in the account is not liquid.
-The money is deposited into the account, it is not safe from loss of principal.
Each –Contributed to the consideration leads to less protection of the client is located.
-The money deposited in the account earns a zero percent rate of return.
-Your income tax liability increases with each new post.
-If the plan is fully funded, there is no income paid to you.

(The components of these investments were obtained from Missed Fortune 101 by Douglas R. Andrews).

Yes, how do you think? You shot me?

Because of attractive features, mostimmediately reject this type of investment. But if you have a traditional mortgage, you have already purchased in the investment referred to above. We refer to this as a pay-off strategy mortgage.

Let's take a closer look at these features of a traditional mortgage. Let's make it interesting, "Let's keep score.

The traditional mortgage

Was the foundation of the traditional 30 year mortgage loan amortized. At maturity, 30 years, the owner of the house outright.Well, things offered by this investment …

You can use the amount of monthly contributions and the length of time for contributions to continue.

In our example, the term of 30 years. However, many home owners to pay) of the past and look at the 15-year mortgage (pay off your mortgage earlier strategy. Regardless, is that the amount and duration of the loan by the loan options that are intended to be offered by 'financial institution. OnceAnd there is defined.

Pay Off Mortgage Strategy: 1

You may pay more than the minimum monthly contribution, but not less.

Pay Now that you have chosen, you are entitled to a mortgage, more than the minimum monthly amount (see) how friendly the bank. What many do not consider that you can pay less. Remember, this is a binding contract, so that you defined with the terms of the financial institution should take.

If you are currently above the minimum monthlyPayment, you're really saying, "Here go Mr. Banker. No, I do not want to earn a return on that money. But if I will ever return, I feel I've done for a reason we deem worthy, who can return, and your condition. "Crazy, is not it?

Pay Off Mortgage Strategy: -1

If you try to pay less to maintain the financial institution in all contributions.

If you miss three payments, the mortgagee the power to foreclose the Your home.

I know that people who tell me to pay the mortgage or bought into the strategy. Most do not know that before you pay a mortgage in this way is risky. Why? Because …

No matter if you have:

Double payments for 10 years …

Putting 80% down payment is less …

Or have one year left on the mortgage market …

… The next payment is always due. If you do not pay, then you can increase the risk of foreclosure … and finally at home> You can have equity locked in your home. Possible the American dream into a nightmare?

Pay Off Mortgage Strategy: -1

The money in the account is not liquid.

Home equity is illiquid. E 'Home Loan captured. To access the money in the form of equity in the house, you need either the property or refinancing to sell.

Let's look at a possible scenario. Suppose you have experienced a slowdown inEconomy and you lost your job. Unfortunately, you have in your home equity of access, in order to maintain your present lifestyle. Now you must prove your financial institution that you need and can repay the loan. But the chances are not good looking your ability to repay. Remember, you are unemployed. The banks lend money only for the fact that you have the ability to repay.

And why not? I think we all have the same attitude and just lending money toThe ability of others to repay.

Would not have this issue, if your "home equity", was separated into a liquid account.

Pay Off Mortgage Strategy: -1

The money is deposited into the account is not safe from loss of principal.

Suppose that the person has his $ 100,000 winner. There is no mortgage. Person B has the same house down the street, but has funded $ 80,000 of capital divided into a liquid and captured only 20,000 U.S. dollars in the mortgage market.

TheAccommodation in this area 30% declines.

As a person A has all his money in his house in the form of capital, has lost only 30%. Person B home value has dropped the same amount of good. However, it still has to fund $ 80,000 of "justice" in the liquid. What is in a better position?

I know what you're thinking is: "But person B a mortgage." Sure, it has a mortgage. But I do not think he can be productive, which with $ 80,000 in a liquid account such as in-houseA loss of value?

Pay Off Mortgage Strategy: -1

Any contribution to the account leads to less protection of the client is located.

As mentioned above, the amount of capital plays no role in determining the value of your home.

If you do a lot of capital at home and you're facing a foreclosure can be a primary goal for your bank. Who do you think a bank would foreclose the first: a net worth of house or a house that is on loanControl? It would be a home with equity because they can get their losses faster than new.

You will notice that banks are willing to pay more with clients that equity work less.

Pay Off Mortgage Strategy: -1

The money deposited in the account earns a zero percent rate of return.

Using the same example of $ 100,000 homes for person A and B, we imagine that the housing market is booming, and the houses in the area appreciated by 30%. HowHouse of a person? $ 130,000. How much is a house of person B? $ 130,000.

Why are they so? That's because home equity has no rate of return.

Houses of value. Home-Equity had nothing to do with it. But let's see who is better with his money?

With the U.S. $ 100,000 in his house, well a person is 30% ($ 30,000) a lock for his money. Not bad.

Remember person B only 20% of the capital house in his home. Blocked with U.S. $ 20,000 in itsHouse, grew up a rich person of Asset B 150% ($ 30,000) for his money. Even better!

Scenario do you think? But remember that no growth can not be accessed until the time of sale or refinancing.

We have not even the fact that person B has $ 80,000 in an account of liquid, interest earning touch!

Pay Off Mortgage Strategy: -1

Your income tax liability increases with each new post.

Mortgage interest is your friend. What? Mortgage Ratesgood?

Let's look at two types of interests: non-deductible and deductible.

Credit card interest is not deductible. You get no tax benefit from the payment of interest on consumer debt.

Mortgage interest is deductible from the other side. Suppose that the interest payable on a mortgage is $ 6000. If you are in the 33.3% tax bracket, the actual cost only $ 4000. Deductible interest is better than not deductible interest.

As you continue to pay the traditionalLoans to reduce this valuable deduction. Course it is not advisable to create an interest for the interest of a tax deduction. But remember, the favorite: The interest is deductible.

Pay Off Mortgage Strategy: -1

Once the projects are financed in full, there is no income paid to you.

This is pretty self-explanatory. Your house does not pay. There is no cash flow. Yes, you have a mortgage. But remember, money is sitting in your house to do only one thingThing. Can be used are other productive ways to home equity?

Again, you can only see that refinance capital at the time of the sale o.

Pay Off Mortgage Strategy: -1

Bonus () is a type: the initial capital is not protected from lawsuits and creditors.

If your house under your name, home equity may be compromised if they are sued. The value is not protected. I do not like a Downer, but we live in a society litigation today.Frivolous clothes are common. More money is in your house, the larger goal is possible on the back.

Pay Off Mortgage Strategy: -1

Okay, let's address the real reason why people want simply to pay their mortgages early. When you "own" at home, have not, of course, guides more. And that's what I hate people who with to make payments.

What we must realize is that everything has a consequence. It is the law of cause and effect. It is not possible with a monthly paymenta good thing. But now you should pay about the risks to the attention of a mortgage in the traditional way. Is it worth it? Is there a better way?

Pay Off Mortgage score overall strategy: (No matter what I think. You decide.)

This kind of thinking on a mortgage may be new to you. I'm sure some of you is a knee-jerk reaction occurs: "No, pay off the loan early!"

It is not difficult to understand why this kind of thinking prevails. My parents and parents of my wifeOwn their homes in principle by. Of course, we had learned from them that this is the best way to pay and was in his house.

But believe they have no money. You have more than 100,000 U.S. dollars in their brothels, and think they have no money. Amazing.

At the time of this article are many people who live in a foreclosures all-time high. Many blame "predatory lenders and financial institutions. Despite having played a role, is still up to consumers to educatesame debt.

I hope this gives you a different perspective, you can pay the mortgage and the importance of learning to debts. Buying a home is a huge financial decision. Be sure to consider how a mortgage can greatly affect your assets.

Related Posts

• Mortgage to pay – the strategy could be the worst financial crisis move
• Why Second Mortgage Loans beat Home Equity Lines of Credit
• Choosing the right Home Mortgage Equity for the situation