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Mortgages
are financial tool much like a stock or
bond. they have the power to help us or to hurt us
depending on our understanding of them and how
we choose to use them.
Understanding Mortgages
Many of us view our mortgage as a
necessary evil.
It is something we need to pay off as soon as possible.
At least that is what we have been taught. However,
if you understand and use your mortgage as a
financial tool it can become a vital part of financial
planning arsenal.
Do Mortgages Lower Home
Values?
First, you must understand that
whether you have
a mortgage or not on your home has no effect on
your home's value. You home's value is only a
function of where it is located and how well it has
been maintained. If you live in an area of the country
where home values are rising, you will see the value
of your home rise (assuming that you have maintained
it well). If you live in an area of the country where
home values are falling, you will see your home's
value fall.
The Equity in Your Home Has
No Growth!
If your home's value is only a
function of its location
and appearance then that must mean that the equity
inside your home is tied directly to that value and
has no inherent growth potential. When you put
money into your home in the form of principle
payments you are saving on future interest costs
but you are losing the ability for that money to be
invested someplace else, where it might enjoy a
rate of return. We call this opportunity cost, since
you have now lost the opportunity to earn interest
on those dollars.
Mortgages Can Free up Equity
If your equity could be earning
more outside your
home than it, you might want to consider using a
mortgage to help you create wealth.
If you
haven't done so yet
now would be a good time
to download this FREE Article
"How the Affluent Manage
Home
Equity to Safely and Conservatively
Build Wealth"
Types of Mortgages
What type of mortgage should you
choose to
help you build wealth? That will depend on several
factors that you should discuss with a knowledgeable
mortgage lender and tax planner.
How long will you be in the house?
What time frames can you be
comfortable with?
How much can you afford to pay?
What kinds of assurances do you
need?
What is my tax bracket and what
will be the
net cost of the mortgage I choose?
How much equity can I legally
deduct?
Now that you have
freed up some money
let's start to create a Private Retirement Plan.
Read on:
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