UPDATE: Utilizing Home Equity to Build Wealth (with Bonus Audio)

A couple of weeks ago on the radio program we talked about the concept of making use of home equity to supercharge your wealth building plan. There was so much to talk about that we were not able to get through all of the information that we had planned to. We promised that we would post the additional content on the blog and here it is! Not only are we posting the text, but I also recorded an audio blog to go over the information.

First, there is the list of the top 10 biggest mistakes that baby boomers are making with their finances. How many of these mistakes are you making? Next I have listed the top 10 reasons to carry a big, long mortgage. Lots of people have decided that they are going to make use of their home equity. The problem is that most of them have decided to borrow against their home and spend the money rather than strategically invest it for their future.

Top 10 Biggest Mistakes Baby Boomers are Making with Their Finances
List taken from Last Chance Millionaire by Douglas R. Andrew

1. They have saved only 1%-3% of their income instead of 10%-20%.
2. They have borrowed to consume rather than to conserve.
3. They have paid off their homes by sending extra principal payments to the mortgage company.
4. They say to themselves, “I would love a vacation home but I can’t afford it yet – I’m waiting ‘til retirement.”
5. They have bought and sold investments at the wrong time.
6. They have not matched the right investment vehicles with their objectives.
7. They are at risk IN the market rather than linking their investment returns TO the market to preserve safety of principal.
8. They have paid too much for insurance rather than letting Uncle Sam pay for it.
9. They are so focused on money and how they don’t have enough, rather than on their most important assets… family, health, and values.
10. They think… after working for 40 years “what was it all for?”

Top 10 Reasons to Carry a Big, Long Mortgage
List taken from an article written by Ric Edelman

1. Your mortgage does not affect your home’s value
   • 11.3 million homeowners underwater on mortgage (MarketWatch). More than 11.3 million homeowners – nearly 1 out of every four Americans with a mortgage – owe more on their loan than their home is now worth, according to a report released by First American CoreLogic.
2. You’re going to build equity anyway
   • IF it appreciates
3. A mortgage is cheap money
   • No way to avoid debt today, mortgages are the cheapest way to borrow
4. Mortgage interest is tax-deductible
   • 6% mortgage really costs as little as 3.9% when you consider that the interest is deductible
5. Mortgage interest is tax favorable
   • Tax law makes it favorable to maintain your mortgage and use the proceeds for investing
6. Mortgage payments get easier over time
   • Over time you can expect your payments to become cheaper relative to your income
7. Mortgages let you sell without selling
   • Collect the value of your home in cash without actually having to sell your house
8. Large Mortgages let you invest MORE money MORE quickly
   • Which would you rather do? Invest $250,000 today or $1600 per month for 30 years?
9. Long-term mortgages let you create more wealth
   • Do you want to be debt free or wealthy? Long term mortgages = lower monthly expenses = MORE money to save/invest TODAY
10. Mortgages give you greater liquidity and greater flexibility
    • There is no tax deduction for making additional principal payments, you deny yourself the chance to earn interest with the money used to pay down the mortgage

BONUS Audio

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Is it time for you to consider this powerful wealth building strategy? If so, contact us for a free mortgage analysis to determine if implementing this idea into your wealth plan can get you where you want to be for your retirement even faster.

11.3M Homeowners Underwater on Mortgage

Would you believe that nearly 1 out of every 4 homes with a mortgage in the US is currently worth less than is owed on the mortgage?  This week on the radio show we talked about using intelligent mortgage planning in order to unlock the power of your home equity for building wealth.  I wonder how many of these people wish that they would have heard about and implemented this strategy before they watched their hard earned home equity evaporate before their eyes.  Another 2.3 million homes have less than 5% home equity according to this article.  Using this strategy is a hedge against home prices falling and if implemented properly, gives you more liquidity and more safety.  Having the discipline to INVEST the money instead of spending it is the key here.  Borrowing money using your home as collateral and spending it frivolously is called BAD DEBT.  Accessing your home equity and placing it into an investment vehicle that is safe and predictable is called INTELLIGENT LEVERAGE.  Might it be a good time to have your mortgage reviewed to see if this is a strategy that could work for you?  If so, contact us today!

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