Mortgage to pay the strategy could be the worst financial crisis move

January 22, 2011 by Editor
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Home Page > Finance > Mortgage > Mortgage to pay the strategy could be the worst financial crisis move

Mortgage to pay the strategy could be the worst financial crisis move

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So every time we listen to the experts, “Invest in your home. The payment of the loan before. Fair Housing is safe and liquid. Conventional wisdom says that your house an asset. Why do they live in housing capital Pago is safe and will be available. your mortgage as quickly as possible to avoid the payment of interest at. expedite payments.
Of course, we are here to challenge those assertions. Imagine I am your financial advisor. I have the investment opportunitiesLet me introduce to you. Let me tell you about the following “properties”.
“You can use the amount of monthly contributions and the length of individual contributions to continue. “You can read more about the monthly minimum payment, but not less. “If you try to save money, the financial institution takes all the contributions. “Money in the account is not liquid. “The money is not deposited in the account of the immune system to the loss of capital. Everyone –Contribution to result in less regard for the safety of the capital. “The money deposited in the account earns returns zero percent. “The increases in income taxes, with the responsibility of every new post. “If the plan is fully funded, will be no income paid to you.
(The components of these bad investments from Fortune 101 by Douglas R. Andrews. )
So how does it sound? I was shot again?
Because of attractive features, mostimmediately reject such an investment. But if you have a traditional mortgage, you have already bought into more investment. Go back to what your strategy mortgage payment.
These functions in a traditional mortgage. Let’s make it count interesting.
The traditional mortgage
For the basics of traditional mortgage loan is amortized over 30 years. At the end of term, 30 years, you must open the house. Well, what are the investments …
You can use the amount of monthly contributions and the length of individual contributions to continue.
In our example, the term of 30 years. However, many owners are willing to pay first and are in search of 15 years mortgage (the strategy of a mortgage) to pay. Whatever it is that determines the amount and duration of the loan by the lending options available to you from the financial institution. OnceFixed.
Payment of mortgage strategy: 1
You can read more about the monthly minimum wage, but not less.
Now that you have selected a mortgage, you pay more than the minimum monthly amount (the funny thing the bank). What many do not consider that you can pay less. Remember, this is a binding contract, if they meet the requirements established by the bank.
If you are currently above the minimum monthlyThe payment is actually saying, “Here is Mr. banking. Do not get a return on money. But if you wanted to go back, I see that I needed this for some reason you deem worthy, you can pay, and their own terms. “Crazy is not it?
Payment of mortgage strategy: -1
If you try to save money, the financial institution takes all the contributions.
If you miss three payments, the creditor has the power to distribute Home.
I know people who say that before I pay my mortgage or to buy into the strategy. Many do not know in advance to pay the mortgage in this way is risky. Why? Because …
If:
Double payments over 10 years …
Spend less than 80% down payment …
Or have a year to get the mortgage …
… The next payment is on hold. If you do not pay, increases the risk of foreclosure … and finally back home> Equity in May ended in his home. The American dream could be a nightmare?
Payment of mortgage strategy: -1
The money in the account is not liquid.
Home equity is illiquid. Is caught in the mortgage on the house. To access the money in the form of equity capital at home, you need to sell or refinance the property.
Consider a scenario. Suppose you have slowedEconomy and the job is lost. Sorry, you need to maintain access their home equity present lifestyle. Now he must prove that the financial institution that is necessary and can repay the loan. But there are possibilities, the ability to pay is not good. Remember, you are unemployed. The banks lend money only for the fact that you have the ability to repay.
And why not? I think everyone should have the same position and lend money tothe ability to pay the other party.
Would not be the problem if their “home equity” was in cash in a separate account.
Payment of mortgage strategy: -1
The money in the account is not immune to the loss of capital.
That is, if a person’s total of 100,000 U. S. dollars. There is no mortgage. Person B has the same house down the street, but a wealth of $ 80,000 in a separate fund and liquid U. S. $ 20,000 in mutual captured.
TheProperty market in this region of 30%.
Since no money at home in the form of capital, has lost 30%. The values of the individual B home fell the same amount of good. However, it is still $ 80,000 “fairness” in its liquid funds. What is in a better position?
I know what you’re thinking: “But the person B has a mortgage. ” Certainly there is a mortgage. I do not think can be more productive, which with $ 80,000 cash in an account at homereduced?
Payment of mortgage strategy: -1
Any contribution to income security, less capital.
As mentioned above, the amount of capital plays no role in determining the value of your home.
If you have a lot of equity in your home and you are in foreclosure can be a primary objective of their bank. Who do you think a bank has refused to rule out the first: a net worth of house or a house that is on loanHilt? It would be a house with equity, can quickly recover its losses.
You will find that banks are no longer willing to work with clients who have less capital to work.
Payment of mortgage strategy: -1
The money in the account earns returns zero percent.
Using the same example of homes of $ 100,000 per person A and B, as the housing market is booming and houses in the area appreciated by 30%. AsA person who is in the house? $ 130,000. House as a person B? $ 130,000.
Why are they so? This is because home equity has no rate of return.
Homes increase in value. Home-Equity has nothing to do with it. But let’s see who is better with your money?
$ 100,000 in his home, a person in prison is a heritage of 30% ($ 30,000) for his money. Not bad.
Remember to person B, with only 20% of the loan at home. $ 20,000 in its enclosedHousehold wealth is passed from person B massive 150% ($ 30,000) for his money. Even better!
What scenario do you want? But remember that no growth can not be accessed until the sale or refinancing.
We did not say that person B has $ 80,000 in a cash account that can earn interest!
Payment of mortgage strategy: -1
Revenue increased responsibilities to each new post.
Mortgage interest is your friend. What? Mortgage Ratesgood?
Here there are two types of interests: non-deductible and deductible.
Credit card interest is not deductible. You will receive no tax benefit to the consumer to pay interest on debts.
Mortgage interest is deductible from the other side. Suppose you are interested in paying a mortgage is $ 6000 If you are in the 33. 3% tax bracket, the actual cost only $ 4000. The interest is not deductible best interest deductible.
If the purchase to maintain its traditionalLoans, whereby the value of the tax deduction. Of course, it is prudent for the costs of interest for the benefit of a tax deduction. But remember that it is better: the interest deductible.
Payment of mortgage strategy: -1
When the plan is fully funded, will be the income paid to you.
It is quite obvious. His house is not worth it. There is no cash flow. Yes, you have more than one loan. But remember, money sitting in your house to a singleThing. Can you imagine other ways to use the equity in the house?
Again, it is understandable that the sale of shares or refinancing.
Payment of mortgage strategy: -1
(A kind of bonus): initial capital is not protected against lawsuits and creditors.
If you have your house in your name, your home equity can be dangerous if you are sued. The value is not protected. I do not like sad, but we live in a society contentious today. Frivolous clothes are common. The species in their country of origin, the larger goal that you on the back.
Payment of mortgage strategy: -1
Well, talk about the real reason why people want to prepay the mortgage. When cleaning the house, of course, there may be more mortgages. And that’s what people hate to make such payments.
What matters is that everything has a consequence. It is the law of cause and effect. You may not have the 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?
The payment of the whole strategy guides: (E ‘what I think. You decide. )
This kind of thinking on a mortgage may be new to you. I’m sure some of you know, the response of the knee-reflection: “No, you pay your mortgage early!”
It is not difficult to see why this idea is widespread. My parents and stepparentsHomeowners directly. Of course, we have learned from them that the best way to pay and has been home ownership.
But believe they have no money. They have imprisoned more than 100,000 U. S. dollars in their homes and have the feeling, no money. Amazing.
At the time of this writing are, many people are suffering foreclosures at record levels. Many blame predatory lenders and financial institutions. As always played a role in educating consumersby debt.
I hope this gives you a different perspective on their mortgage payments and the importance of learning to manage debt. Buying a home is a huge financial decision. Be sure to consider how a mortgage can affect your wealth substantially.
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