| ||
|
|
|
|
|
| ||
|
|
|
|
|
How Much Interest is Your Home Equity Earning?
How much interest are you earning on your home equity? If you answered nothing, zero, zilch, zip you are correct. What would you do if you could get triple compounding on your equity? Would you take action and build a fortune that would allow you to pay off the mortgage and create a retirement fund? We use a strategy called Early Mortgage Pay Off System or EMPOS?. The strategy involves using common knowledge that is applied uncommonly. In other words, we have been told for years that a fixed mortgage is the way to the American Dream of having our homes paid off free and clear. But is that really a dream, when all along the way you struggle to make those large payments? What if you could reduce your monthly mortgage payments and increase your cash flow? By using the right mortgage product you can keep your monthly payments low and redirect some of that cash back to yourself in an investment that gets triple compounding because it is tax deferred. First, you examine to see if a Pick-a-payment Mortgage is applicable to your situation. This type of mortgage product allows you to choose between four options each month. The options are a 30-year payment, a 15-year payment, interest only or minimum monthly payment, which has a low start rate (currently 1.95% to 4.95% depending on the investor's, credit, income and other market factors). You can match your loan payments to your variable or seasonal income and begin using the saved income to create wealth. This mortgage product uses a monthly Adjustable Rate concept to determine the actual rate of interest charged. The loan is linked to one of various indexes like the Cost of Funds Index (COFI), the Monthly Treasury Average (MTA), Certificate of Deposit Index (CODI), Cost of Savings Index (COSI) or the London Interbank Offered Rate (LIBOR). A loan consultant can determine the index and program that best fits your individual financial situation. Fixed percentage points (the "Margin") are added to the index and establishes your effective interest rate and monthly payment Many of the super elite and very wealthy use this type of mortgage on their homes when they could afford to pay their mortgages off today. Why? Because they leverage their mortgage as a tool to create wealth. Even Alan Greenspan has an ARM mortgage on his home when he could afford to pay it off. History shows the ARM mortgage consistently outperforms a fixed rate. What do I do with all my monthly savings you ask? We like to see it go into an environment where the money can earn triple compounding. Triple compounding is where you earn interest on your principal, interest on the interest and interest on the amount that would have gone to taxes. One of the best places to get tax deferral that creates a triple compound is with life insurance. In addition, there are equity indexed life insurance products that allow you to participate in the stock market while it is up and lock in the gains when the market falters. It is the best of both worlds because it earns at better than traditional fixed and is safer than a variable insurance product. You may have sold yourself on life insurance being a useless product. Well, consider the following example of life insurance compared to a ROTH IRA. The IRA offers no creditor protection if you get sued, the equity in your home is always on the table for a creditor to take. Additionally, your contributions to an IRA are limited, there is no death benefit if you prematurely pass away, and there is no disability aspect among other features. After the Tax Reform Act of 1986, the Wall Street Journal had an article that said there were only five tax-advantaged investments left: ? Your personal mortgage ? Qualified retirement plans (i.e., EP, 401K, IRA, Pension, Profit Sharing, etc.) ? Tax Free Bonds ? Live Insurance ? Annuities. The reason that life insurance was listed is because life insurance offers you the opportunity to have tax-deferred growth/compounding on your money as well as access on a tax advantaged basis. What if we took the power of tax-deductible borrowing and invested the money tax-free? This is done by refinancing or using a Home Equity Line of Credit (HELOC). A client could take out money and fund the maximum in their equity-indexed universal life product to the extent they do not violate tax law and create a Modified Endowment Contract (MEC). Too, the client who is 59 ½ could place some proceeds into an single premium immediate annuity (SPIA) and fund the life insurance over the next couple of years directly. If the client were at least 55 years of age their situation could be appraised under the substantially equal payment exclusion to the 10% excise tax penalty on distributions prior to 59 ½ . There are other planning opportunities and the client would have the proceeds to invest, assuming their financials line up with the requirements of the lender. Like any type of investing, there are pros and cons. The pro is that you can create significant wealth and is safer than playing the stock market. The con is that you would tap out equity from your home and by using one of many strategies; you might not pay your home off under the thirty years unless you choose to. However, you would likely build enough to pay off the mortgage in a lump sum if you cared to, or continue to use the mortgage interest deductions when you need them - as a retiree. Also, the amount of estate tax can be reduced since you only pay estate tax on what you own. There are numerous pros that outweigh the cons and you can find a savant on either side of the pro and con. Ultimately, a person must make up their own mind and begin to think outside of the box or join the masses that play it safe and will have to sweep floors in a retail store during their retirement years. In closing, remember, equity can only be tapped two ways (1) selling the property or (2) an equity loan, but when you need it most the loan is not always that easy to get. If you want to create a significant amount of wealth and have a few years to still pay on your mortgage, you might want to examine to see if utilizing your equity to provide for your future is appropriate. James Burns Law Office of James Burns 18662 MacArthur Blvd, 2nd Floor Irvine, CA. 92612 (949) 440-3243 © James Burns, Esq. James Burns is an attorney with two law degrees and helps individuals and small businesses with Life Planning Solutions, a trademark concept he created.
MORE RESOURCES:
Google News |
|
|
|
RELATED ARTICLES
Non-conforming Home Loans vs Conforming Loans The simple definition of a "non-conforming home loan" is: You have a job and can make the payments. Your credit is used only to determine your interest rate and the loan amount to value of the home ratio. Refinance Your Home Mortgage Online The largest financial obligation most people ever take on couldn't escape the reach of the Internet. Home mortgage loans originated online comprise an integral part of one of the largest and most profitable aspects of the banking industry. Home Equity Loans: A Useful Financial Tool The investment need of an individual varies with time. Thus the need to buy a car or invest in a new house, which may have seemed "beyond means" a few years ago, may be a relevant and wise decision today. Home or Investment Property Equity: Be Sure the Bank Gives You All that You Deserve Home equity is your own personal money machine. If you want financial freedom, a home equity loan is probably the best way to achieve it. How to Shop Around for the Cheapest Mortgage Deal Online Before you start shopping around for a mortgage, you need to establish exactly what you want so that you do not waste your time looking at deals that will not save you money. You should also learn how to compare mortgages or choose what features of the finance package are important to you. Home Equity - Let the Market Eliminate Your Private Mortgage Insurance In decades past, most people who were interested in obtaining a home loan were required to put down at least 20% of the purchase price. Those days are gone, and as home prices have risen faster than incomes, the average down payment required by lenders has dropped. Home Equity Loan vs. 401(K) Loan -- Which Should You Choose Home Equity Loan vs. 401(K) LoanYou've finally decided to add that patio you've always wanted to your home. Refinancing Online - Get The Best Refinance Home Loan You Can Get When going to refinance or get a mortgage loan quote, the internet can be a useful tool to shop around for the best interest rate. The reason the internet is a good place to start applying, is because most mortgage applications online do not typically pull your credit with the first application. Home Loans and Mortgages - Time to Consolidate Loans? Home equity loans and lines of credit are useful tools for homeowners. They allow the homeowner to borrow against the value of his or her home for all kinds of purposes - home improvement, debt consolidation, vacations, and more. Interest-only Mortgages Have Their Pitfalls Rising home prices, particularly on the East and West coasts have put the costs of home ownership seemingly beyond the reach of many. And yet, home ownership is up nationwide, and the percentage of Americans who own their homes is the highest it has ever been. A Mortgage Loan For Homes Everybody wants to own a house because it is something that portrays your success in life. Some people make some ways on how to own one by considering a lot of things including borrowing money from banks, lending offices and finance institutions. Kippers or Red Herrings? Recent news has made much of parents stretching their finances to cover costs for their twenty and thirty something children. Debts and high property prices have forced many offspring to return home, tail between legs, under the attractive new marketing term of "kippers": kids in parents' pockets eroding retirement savings. Home Loans For People With Adverse Credit History Whether you are planning to purchase a home for the first time or refinance an existing mortgage, plan on comparing lending companies before you accept a financing offer if you have adverse credit history. Sub prime lenders specialize in offering loans to people who have a high-risk credit history. Mortgage Advice In the US today more households have mortgages than ever before. In fact the chance of you having or knowing someone who is paying off their mortgage is greater than 50%. Option ARM Mortgage Loan - Is This Really for You? What happened to the days of a 15 or 30 year fixed rate mortgage loan? Ultimately this is the safest and most popular mortgage loan product in our industry, but new mortgage products are hitting the market, and we in the mortgage business are using them to our advantage; ever heard the radio advertisement saying, "buy a $200K home for $643.28 per month; call XYZ Mortgage Company to apply"? The product used in this ad is called an Option ARM, and I feel it's my duty as a mortgage professional to tell you what this product is in case you happen to meet up with that loan officer whose only concern is to make a fee, and not have your best interest in mind. Council Right To Buy Mortgage - Transform Your Accommodation Into Home Homeowner - does this term catch your attention every time you hear it? It is a powerful term. It is hard being a tenant for long. Buying A Home? Reasons to Consider Financing Your New Home Loan Online Financing your new home loan online can save you time and money. With information at your fingertips, you can quickly educate yourself about the loan process and compare mortgage lenders to find the best rates. Finding the Best Home Improvement Loans When the time comes to do work around the house, finding good deals on home improvement loans can be vitally important.Home improvement loans can be used to help you improve any part of your house or other real estate, providing you with the money to get the materials that you need and to hire the professionals that can get the job done. PayDay Loan Online - Quick Cash Advance Loans Online Are Very Convenient Getting a quick cash loan, cash advance or payday loan has never been easier than it is today, thanks to the internet. Today you can apply and be approved for a payday loan or cash advance fast, in the comfort of your own home. Selling Your Business Note Before I go further, let me ask a question- if you won the lottery tomorrow, would you take the payout in a lump sum or in monthly payments?Most people would take a lump sum because even though it might be less than the total prize, they would have control over a large sum of money now and could let the time value of money go to work and increase their winnings.So why then would you opt to get paid on your business sale over several years rather than take a lump sum payout?The answer is probably because you didn't know that you could get cash for your business note.
|
| Home | Privacy Policy & Legal Information | Contact |
