|Mortgage Refinance Information|
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
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.
Law Office of James Burns
18662 MacArthur Blvd, 2nd Floor
Irvine, CA. 92612
© 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.
Home Equity Loan Risks
Home equity loans give individuals a tool to extend their existing credit line by securing debt on the equity value of their existing homes. This access to easy and cheap money can lure the borrower into securing a debt for reasons which otherwise could have been funded through wise money management.
Save Time With a Bridge Loan
Why You Need a Bridge Loan
Getting the Best Homeowner Loan for Your Money
With so many lenders out there, it can be hard to tell if you're getting the best homeowner loan for your money. Banks, finance companies, and online lending services all offer competing loans, but determining which offers you the best homeowner loan can be tricky.
Interest Only Home Loan ? Is It Right For You?
There are many benefits to interest-only mortgage loans. There are many situations where an interest-only mortgage loan could be best for you.
Home Mortgage Quotes Online - How Do They Compare To a Quote From a Broker in The Real World?
Online home mortgage quotes are very similar to the quotes given by mortgage brokers in "the real world," except lower. With the reduced cost due to a simplified application process and reduce overhead for office space and personnel, online mortgage lenders can offer financing with no fees or lower interest rates.
Total Cost Of Credit vs Monthly Payments
I read a press release the other day which points to the fact we need to be very careful with our finances. The subject of the release was home mortgages. A company was announcing the availability of 40 year mortgages for its customers. The stated purpose was to lower the monthly payments to make buying a home more affordable.
Bad Credit Home Financing - Buy a House Even With Poor Credit
Sub prime lenders come in two groups: reasonable and unreasonable. Reasonable sub prime lenders offer mortgage financing to high risk borrowers with slightly increased rates and fees. Unreasonable sub prime lenders charge several extra points and excessively high fees. Only through comparative shopping can you know if a particular lender is offering reasonable or unreasonable rates.
Home Loans: Where Do I Begin?
So you've finally decided you've had enough of paying rent and want to jump into home ownership. Well you've got your work cut out for you. Plumbing problems are now your responsibility, not your landlord's. A nice, clean yard is also your responsibility, not your landlord's. The air-conditioning goes out in August, who do you call. Not the landlord, you're now responsible. Yep - a lot of work.
Understanding Mortgage Basics
As common as mortgages are, there are a surprisingly large number of us who are under false impressions about the way they function, and what they actually are. For one thing, though we do commonly call mortgages "home loans," this is not at all what they actually are. In fact, mortgages aren't loans at all, nor are they something that have been given to you by lenders. More accurately, it is a security instrument that you have provided to a lender. It is a document that protects your lender's interest with your property itself.
If you as an investor understand the process, you will be able to help more people!
What is a Self-Certification Mortgage?
A Self-Certification mortgage is a mortgage designed for people who are unable to provide proof of income. This type of mortgage was originally designed for the self employed who historically experienced difficulty obtaining a loan with 'high street' lenders due to not having audited accounts available.
Zero Down Payment Mortgage ? Can It Be Done?
"I've been renting for years now; I've always paid my rent on time. I'll start a savings account soon, so I can buy a house": sound familiar? How much is in that savings account now? Just as I thought, not enough, you went on vacation, found a car you had to have, or WOW; look at the flat panel T.V. on the wall that you're renting, etc, etc. There's a secret that your landlord doesn't want you to know; you can buy a house with zero down payment. Do you want to know how? Hang on, here we go. Hire a good mortgage professional, it's that easy. Do you want to know more? Of course you do, here are some mortgage programs to help you.
A Guide to Direct Homeowner Loans
Are you considering applying for direct homeowner loans? Perhaps you're simply wanting more information on direct homeowner loans so that you'll be able to make an informed decision?
Home Improvements Turn Average Homes into Dreams Come True
If you're thinking about taking out a home improvement loan, there are several options to consider. First and foremost, your mortgage consultant needs to know why you want a home improvement loan. Here are some factors to take into consideration.
How To Determine The Price Of Your Home
Why is it that some homes sit on the market for a year while others sell like hot cakes? Frustrated sellers will blame a bad market, while a good real estate professional will tell you that many times, a slow sale is often attributed to the listing price.
5 Ways to Use Your Home Equity Line of Credit
Your home is a source of pride and accomplishment. Did you know that your home can also be an affordable source of income? As your home appreciates and you make your monthly mortgage payments you build what's called equity. You can access this equity at attractive interest rates using a home equity line of credit (HELOC).
Home Buyers Face Decisions that Affect Their Long-Term Financial Picture
Taking the step for prospective home buyers.into home ownership is one of the most important financial decisions a person will make in their lifetime. There are many factors to consider when embarking on this venture. Literally hundreds of loan programs are available, and it is important to find the one that best fits your personal long-term goals.
Should You Refinance Your Mortgage if Interest Rates Drop?
Mortgage refinancing is when you take a mortgage of a certain interest rate and term length, and change it for a different interest rate and term. If you are looking to refinance your home loan it is usually done when rates have dropped considerably therefore making it advantageous to do so. When I say considerably it usually means a drop of at least 1% from what you're paying now.
Stop Foreclosure - 7 Tips to Save Your Home
Faced with the threat of a foreclosure on their home, with all the weight of the mortgage industry and its army of attorneys against them, the average homeowner might feel like David facing Goliath.
Mortgage-Refinance Loan Can Put Cash in Your Pocket
Do you need cash? Here's a mortgage for you. If you are not in a good position to take an equity line of credit on your home, because you have not built enough equity or a poor credit situation is making bankers steer clear of you, altogether, there is another option -- the cashout refinance. This loan does what the equity line does in most cases, but it is not an interest-only loan, and it has conventional mortgage terms. The advantage for people without enough equity and less than perfect credit is you can get at what little equity you do have by refinancing to a new conventional mortgage, taking cash out at the close of the loan.
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