Call it crazy, but there are actually people in America
today, who want to pay off their mortgages. Why? Is it the
desire to attain the elusive idea of financial freedom? Is
it a dream of secure days and carefree nights? Or is it the
need to be out from under the oppressive taskmaster named
debt? Those are all good reasons, and they really amount to
the same thing. Being in debt is the opposite of building
wealth.
Face it. Your mortgage, for which you probably broke
traffic laws to get to the closing, has become a ball and
chain. The dollar amount of your home loan may have
actually increased over the years, while the appraisal
value may have gone down. This begins to look rather
hopeless after a while.
Now, there are some friends of mine who claim that they do
NOT want to pay off their mortgage. They say they need the
tax write off. I just can't get my mind to go there. I say
that there is no tax advantage that can outweigh being
debt-free. The mortgage must be paid off to really build
wealth, so the question is.....how?
Most of us Americans have purchased the maximum house
allowable, right? Didn't you sit down and figure out your
budget with your lender? They have formulas for this kind
of thing, and we all went for it. They were right. Your
mortgage is probably just the right amount to guarantee
that you can make your payments....almost comfortably. By
the way, they also know that you will probably be
refinancing in the next 5-7 years, and that you will,
indeed, never get out from under the beast that is called "
closed-ended loan with front-loaded interest". It is a
killer, make no mistake.
You have GOT to do something about it. So how do you pay
off a mortgage? Simple. Just add more money. If you pay
down your principle balance, they charge you less interest.
If you make just one additional payment per year, you will
save 5-7 years of payments at the end of your mortgage.
Great. Where am I going to get an extra $1199 this year?
You could scrape up $100 per month couldn't you? Sounds fun
doesn't it? Not.
Well, what if you could use someone else's money? Would
that work? Yes, I think it would. In fact, if you could
apply $5,000 to principle on your 30 year mortgage, just
once, you would eliminate $28,000 in interest charges. Why,
if you did that several times, you could pay off your
mortgage in a fraction of the time! So, who is going to let
you use their money, because most of us don't have the
extra 5 grand sitting around. Ah, but perhaps you do.
See the whole time you are slaving away and making your
mortgage payments, you are building equity. Not much at
first, but it is happening. You also may have some built in
value in your home or elsewhere. This is the beginning of
leverage.
The bank has available to you, a completely different kind
of credit. It is called "open-ended" credit. It is nothing
like your mortgage.
Your mortgage is closed-ended credit. Money only flows in
one direction. The Bank's. You have to make full payments,
on time, and you can never ask for them back. The interest
is extremely loaded onto the front of the loan, so that the
bank gets paid their profit first, long before you actually
make progress on your part of the loan. That is why banks
have the biggest, nicest buildings in every town or city.
But open-ended credit, in the form of a Home Equity Line Of
Credit (HELOC) or a Personal Line Of Credit (PLC) allows
you to create real cash flow. Cash flows in and out, and
every time it does, the balance in the account changes. The
bank can only charge you interest on the actual daily
balance. So get the picture here. If you were to borrow 20
dollars today, and pay it back tomorrow, you would only owe
interest on 20 dollars for one day.
If you were to borrow, say $5,000, and make a payment to
the principle on your mortgage today, and then deposit your
$5,000 paycheck tomorrow, what would happen? Well, you
would owe the interest on $5,000 for 1 day....about $1.75 -
$2.00. But you cancelled $28,000 in interest charges on
your 30 year mortgage! Whoa! Does this sound too good to be
true? Yes and no.
The fact is, this is just math and money. Neither of them
ever sleep. If you do the math right, this idea becomes
fact. The problem is, it is a lot of math. You would
constantly have to be monitoring your cash flow, expenses,
fluctuations, and lifestyle. Life changes all of the time.
You cannot just pull a dollar figure out of a hat, and go
borrow some money from your HELOC. You could easily get
yourself in an expensive financial hole. It would have to
be a precise number, and that number would always be
changing. Boy, if only there was computer software.......
Did I mention that there is computer software that can help
you do this? Oh yeah. There are several companies out there
that offer software of different kinds. Some companies are
just banks who want to "help" you refinance, some offer a
course on how these ideas work, others are legitimate
software developers. Most of them charge $3500, so make
sure you pick the right one. The front runners in the
industry are: United First Financial, Sydney Financial
Group, CMG, Free and Clear, and McCory. More are popping up
all of the time.
Do your own research, and make sure that you are not
getting stuck with nothing more than a fancy spreadsheet.
You need something dynamic that changes with you and your
financial rhythm.
Call these companies at their customer support centers and
see how long you have to wait. You want to deal with
professionals. You want live customer support for life. You
want free updates. You want a written guarantee. But mostly
you want the best, most intuitive, interactive, simple to
operate system, and not a static piece of software with an
owner's manual. Don't fall for a 10 year projection on your
payments. Remember, life changes and so will the numbers.
If you do this right, you can be debt free in 1/3 to ½ the
time. You will save a fortune in interest payments. You can
discover a whole new way of thinking about money, like how
to make other people's money work for you, instead of the
other way around. Enjoy.
----------------------------------------------------
Marc Rosenbaum lives in Colorado, and is on a mission to
get you out of debt. It is time to take control of your
finances. Start now!
http://www.debteraser2007.com
http://www.thecashgarden.com
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