Copyright 2006 AAA Consumer Credit Solutions
A New, Fast Mortgage Payment System delivers a cool $250,000.00 Retirement Benefit, at least. This sum could reach up to and beyond the half a million dollar mark, $500,000.00 or so if a savings program is involved. This new system is threatening to revolutionize the Mortgage Business in both Canada and the United States.
We did the calculations. Previously, the total bill to repay a $200,000.00 Mortgage at 5.0% interest is at least $700,000.00 to use rounded numbers. You earn the $200,000.00 to pay off the loan. Another $280,000.00 is the interest paid on the mortgage loan. Then you must pay government taxes on your earnings of another $220,000.00, assuming you are in the 40% tax bracket. Since this is not a math class. These figures are close and meaningful approximations.
Faster Mortgage Payments: Now, an expanding group of Financial Advisors are quietly advising their Clients to turn those mortgage payment numbers around to create their own wealth. The Advisors Plan works something like this. Since you must earn the $700,000.00 to pay the Mortgage, Why not keep Interest and taxes to a low of $ 200,000.00 total. Then you the Home Owner could pocket the difference --$500,000.00. Two Hundred Thousand Dollars ($200,000.00) pay the mortgage loan on the home and $300,000.00 you keep from Tax savings and interest savings because you followed the fast mortgage early repayment plan or SMERP.
This new approach to Household Budget and finance involves a series of fancy financial footwork that effectively pays off the mortgage principal faster. Now you could be free of a mortgage in one half to one third the time it previously took. If a 30-Year mortgage gets paid off in 15 or 20 years in the United States. Or, if in Canada, a 25- year mortgage gets paid in 15 or even 10 years, then the fortunate Consumer just freed her Home Budget from 10 or 15 YEARS of Mortgage Payments. That simple maneuver accounts for the core savings in these new techniques. In our example, at Monthly Payments of $ 1163.03, 10 years of payments saved, alone, would create almost $140,000.00 of cash savings. Fifteen years would produce raw savings above $209,000.00. When we add other realities such as a positive return on those dollars over 10 to 15 years,, then these dollars begin to be counted seriously in fractions of a million dollar range.
Ten years ago when I first heard a whisper that something of the kind was in the air, those in the know would keep it a closely guarded secret. Now the secret is out. This is still not common knowledge even among Financial Advisors. Mortgage Holders still think you had one too much to drink when you first begin to discuss the subject. And of course, Lenders, such as the Mortgage Banks, Insurance Companies and other financial institutions do not want this secret out too fast. For the individual Borrower or Consumer, this is a half a million dollars of savings over 10 to 15 years. To the Lending institutions, 100 of these fast pay mortgage loans could create a significant drop in the Companys profit margins.
Smart Mortgage Early Re-payment: The exact mechanics of these features of the fast payoff, Smart Mortgage Early Re-payment Plan, require the involvement of professionals in most cases. That is why as a Consumer you must get an analysis of your existing mortgage. Contact a knowledgeable Financial Advisor to see if these techniques can be applied to your specific home mortgage. You may be able to use your existing mortgage and avoid the early mortgage pay off penalty. Additional costs for an appraisal, legal and title registration costs could be reduced when the Banks compete against each other for your business. Try it. Success might be easier than you think. Who wants to make an extra donation of $250,000.00, plus or minus a few dollars, in excess taxes or Bank Profits, needlessly?
The success of these techniques often lies in applying allowable tax deductions, and creating new ones you may not yet know about. For example, you use the home equity as an Investment. Your Accountant will confirm that such investments usually permit a tax deduction on the interest expense for Canadians. American home mortgage interests are already a tax deductible item. So, an increased Investment Loan would generate a bigger tax deduction. You need the help of knowledgeable Professionals, including your Accountant, your Lawyer perhaps, and a Financial Advisor. The numbers are usually bigger than those you are comfortable with in your Home Budget. As a Consumer, you will only succeed by exercising strong discipline over your spending habits.
This is not simply The Old Bi-weekly Mortgage Payment: This is not a simple rehash of the old, tested Bi-weekly or even weekly Mortgage Payment scheme. The Bi-weekly Mortgage Payment, if applied rigorously could repay a 30-year mortgage in about 25 years in the USA. In Canada, A Bi-weekly Mortgage re-payment strategy will pay off a 25-Year Mortgage in 22 years, or so.. The savings that would result would be around $41,000.00 to $45,000.00. This is a far cry from the $250,000.00 to $500,000.00 figure in the Newer, Smart Mortgage Early Re-payment System. A decade or two ago, the bi-weekly mortgage payment technique was the hottest and smartest mortgage re-payment scheme we knew, At that time, Bankers fought with anyone who dared to contemplate such heresy. With this new mortgage re-payment phenomenon, these same Lenders are using more subtle psychology in steering Consumers away from the potential for a drastic reduction in their profit margins.
Success is SMERP, Smart Mortgage Early Re-Payment not HELOC: The key to success with the Smart Mortgage Early Re-Payment technique is to have the Home Owner re-invest from the equity in the home. HELOC, or the Home Equity Line of Credit does not do the same job. HELOC carries more risks than the newer, smarter and faster Smart Mortgage Early Repayment System. Some Banks lead the trend by offering flexible and easy access to the home equity. Without the goal setting, and discipline, the confidence and mentoring role of a Financial Advisor, Consumers would do what Consumers do well. They would consume their new found wealth, by going on a cruise, paying down credit card debt, buying a second car, making renovations to the kitchen, the patio, the bathroom; paying the Childrens college expenses. Seldom would the Consumer set this as a goal to pay down the mortgage super fast. That is the role of a handful of Financial Advisors who make it their business to stay on top of the latest trends and to advance the interests of their Clients to the maximum.
Naturally, there is a pay off for the conscientious Advisor also. The $250,000.00 or $500,000.00 in savings get invested to reach the $750,000.00 and the $1,000,000.00 mark with compounding over time. And our Financial Advisor Wiz Kid? .. Well, She gets handsomely rewarded with the well earned fees from all of those additional Investments. |
