What is the biggest secret of real estate? Your mortgage is a loan for your income, not the value of your home. Without income, you often can't get a loan. If you suddenly experience financial difficulties, are you willing to spend $25,000 in cash to help you pay or pay an additional $25,000 in equity? Anyone who loses foreclosure if they separate their equity from their home, their assets can be used to pay for the mortgage when they need it. In 2003, financial planner Doug Andrew first explained in his book the strategies that the rich have been using for decades. from
Missed the wealth. from
Doug teaches his readers to look at their mortgages and home equity from different perspectives - the lens used by the rich. He showed how relatively small changes in home equity and positioning can have a huge long-term impact on financial security.
Many Americans believe that the best way to pay off their homes in advance is to pay the extra principal of the mortgage. Similarly, many finance professors believe that a 15-year loan can save you money by lowering the interest you pay. However, Doug pointed out that this idea is flawed. If you leave the monthly payment difference between the 15-year and 30-year loans and the savings saved in a safe return account with a conservative rate of return, you will have enough money to pay off the home within 15 years. $25,000!
In April 1998, from
Financial planning magazine from
Introduced the first academic study on 15-year and 30-year mortgage issues. They concluded that a 30-year loan is better. Based on the same logic, isn't interest loans better than amortized loans? Because of the tax breaks on mortgage interest and compound interest income, you can borrow at a higher interest rate and invest at a lower interest rate, and still get a substantial profit.
The importance of separating equity from home In from
Missed the wealth, from
Doug suggests that people strictly consider separating as many assets as possible from their families. These three main reasons are often used as tests for prudent investments:
- How is the liquid?
- How is it safe?
- What kind of return rate can I expect?
Separate fairness to increase liquidity When the stock market collapsed in October 1987, the importance of liquidity became very apparent. If someone suggests that you sell your stock and convert it into cash, they will become heroes. People with current assets can continue to invest and receive rewards as the market fully recovers within 90 days. People without liquidity are forced to sell when the market falls, causing them to accept significant losses.
In from
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Doug tells a couple who learned what he called: "a $150,000 liquidity course." In 1978, the couple built a characteristic house. from
Better homes and gardens. from
It was appreciated and in 1982 it was assessed at $300,000. They think they have a world tail - a house worth $300,000, and the first and second mortgages owe only $150,000. They believe they have "earned" $150,000 in just four years.
Then, a series of events made their income almost no reduction. They can't borrow money because they have no ability to pay back without income. They quickly realized that in order to protect their $150,000 stake, they had to sell their house. And because the real estate market is soft, they have repeatedly lowered the asking price - down to $195,000 - and still can't find buyers.
Sadly, they were in foreclosure and the two mortgages were $125,000 and $25,000, respectively. The second mortgage holder surpassed the first mortgage holder at a subsequent auction, feeling that it could reverse and sell the property to pay for the investment. The sale took nine months, during which the lender was forced to pay the first mortgage and accumulate an additional $30,000 in interest and a fine. When the house was finally sold, the couple who originally owned the house not only had seven years of foreclosure on the credit report, but the report also showed that the deficit on the house they lost a year ago was $30,000. When the economy was frustrated, they lost one of their most valuable assets due to lack of liquidity. If they separate the $150,000 home equity and reposition it as a secure account, they can easily pay for the mortgage.
At this point in the story, Doug admits that the young couple is really him and his wife. He wants his readers to know that he understands the importance of maintaining liquidity in an emergency. And he learned to never allow a large amount of equity to accumulate in his property. "Future Homes" and "Cash Poverty" are a dangerous situation. Getting the value or value of a home is better than not needing it, not needing it and not getting it. Keeping home equity security is actually a way of locating yourself, rather than reacting to market conditions beyond your control.
Separation fairness increases trustee security Real estate equity is not as safe as many other investments and assets because of the hidden "life risk". A house, either mortgaged to the handle, has freedom and clarity and provides maximum security for the homeowner.
According to a recent study, 67% of Americans have more home equity than all other investments. However, if 100 financial planners view 67% of their client portfolio in one investment, 99 of them will immediately suggest that customers should be diversified. Holding a large amount of home equity puts homeowners at unnecessary risk.
When oil prices fell to an all-time low in the early 1980s, Houston was hit hard. Thousands of workers were fired and forced to sell their homes. Prices have plummeted due to oversupply in the market. Unfortunately, due to too many sellers and too few buyers, 16,000 homes were foreclosed. Have these families suddenly gone bad? No, they just can't pay for their mortgage. Previously, many of them had already paid extra principal. However, they cannot rely on these extra payments, and there are so many homes for sale that some people actually have to leave home. The fairness of these people's efforts to establish them has been completely lost. They learned that home equity is definitely not as safe as they once thought.
Separate fairness to increase returns No matter where you live, the return on home equity is always the same from
zero. from
House prices fluctuate due to market conditions, not mortgage balances. Since the home equity is not related to the value of the home, it is not responsible for the value of the home. Therefore, the net worth of the home is only idle at home and does not receive any return.
Suppose you have a free house worth $100,000. If it appreciates by 5%, you have $105,000 worth of assets at the end of the year. What if you separate the $100,000 equity and deposit it into a side note account with a yield of 8%? Your account is worth $108,000 at the end of the year. You still own a house, and the price is up 5%, worth $105,000. By separating the equity, you create a new asset that is rewarded. Therefore, you earned more than $8,000 more than the idle money at home. To be fair, you do have a mortgage that you didn't have before. However, since interest rates are relative, by assuming an 8% return, we can also assume that only strategic interest mortgages can reach 5%. In addition, since 100% of mortgage interest is tax-free, the net cost of this fund is only 3.6%. This creates a 4.4% positive difference between the cost of money and the return on that currency.
Over time, this story will become more complex, and the sub-account will grow at a faster rate every year. In the second year, the 8% income of $108,000 was $8,640. In the third year, the 8% gain of $8,600 was $9,331. As mortgage debt remains unchanged, the interests of homeowners continue to expand each year. Albert Einstein said, "The most powerful force in the universe is compound interest." If we allow home equity to be idle at home, we will give up the opportunity to put it into operation.
From a different perspective, assume that the value of the investment you receive will never rise, but it may fall. How much do you want? Hope no. However, this is the net worth of the home. It has no rate of return, so value won't rise - but if the real estate market falls or the homeowner experiences uninsured losses, disability or foreclosure, its value may fall. After all, the house was built to accommodate the family, not to store cash. The investment is used to store cash.
If you live in Ohio or Florida and would like to gather more information about the power of a strategic mortgage program, please call my office toll-free at 877-436-5333. Our company only operates through recommendation; Therefore, please refer to the name of this article so that we can expedite your request for consultation.
Orignal From: Successfully manage home equity to increase liquidity, safety and return
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