Real Estate Investment and Mortgage Financing Resources
Lending Company Puts Forth A New Philosophy
An interesting concept is being put forward by a company called Global Equity Lending which, according to them,is rooted in the fact that building a secure financial future is more difficult than ever.The rules are changing and perhaps the old practices need to be revamped.GEL calls its new philosophy, "Harnessing The Power of Your Mortgage"
In 2004,credit card debt accounted for over half of the $2.1 trillion of consumer debt in the U.S., quadrupling over the last decade.Today,the average American household has $9,000 of credit card debt at 16% interest.To pay that average off,at that interest rate would take ten years,totaling over $8,000 in interest when all is said and done.The financial impact of this,which is virtually unrealized is devastating.GEL claims to have a better way.Their thinking is that since you must borrow money over the coarse of life,why not borrow it as inexpensively as possible.Credit cards,auto loans,and personal loans are all high interest and non deductable.So why not harness the power of your mortgage?
According to GEL,Americans operate under a mindset,when it comes to personal finance,that has been burned into our country's psyche from the days of the great depression.That philosophy is as such:First get the lowest rate mortgage,then,set up a bi-weekly payment plan,and,whenever possible send in additional payments.This way you pay off your mortgage as soon as possible. Sound good to me,right?Well,much to my suprise,this company claims that is exactly what we should NOT be doing!On the contrary,their idea is one which is echoed by New York Times Best Selling author of "The New Rules Of Money",Rick Edelman,who says,"You should get a big,30 year mortgage and never pay it off."Edelman and GEL put rules forth which read like this:
1.Never send extra money to your mortgage
2.Stay away from bi-weekly plans.
3.Make the smallest payment with the biggest tax break.
4.Putting extra money toward your mortgage is like putting it under the matress.
To back up his claim,Edelman offers five distinct reasons why you should carry a long loan:
1.Mortgages don't lower your homes value.Your home will grow in value whether or not you have a mortgage.
2.Your mortgage is the cheapest money you'll ever buy.Why pay credit card at 18%,when you can borrow at rates under 7%.
3.Your mortgage is the best way to lower your taxes.There aren't many tax breaks left. Mortage loans,unlike credit cards and car loans are fully tax deductable.
4.You should get cash out of you house while you still can.You may find it difficult to get a loan if something like a loss of job comes up.
5.Mortgages become cheaper over time.Most times your payment will stay the same over the years while your income rises,making it easier to pay over time.
To further illustrate their beliefs,GEL presentations include a case study called,"The Tale of Two Brothers", where they do a financial comparison of two fictional brothers.In the story,Brother A,as he is called follows the "old" way of thinking,while his brother(yes,you guessed it,brother B)uses GEL and Edelman's theory.The results of the study find Brother B with almost a one million dollar advantage over Brother A.The full hypothetical can be viewed on http://yourbighouse.com, but the jist is that the second brother used the money he saved carrying an interest only loan,or GEL's famous "power option"loan to invest in other places.That,combined with the mortgage tax breaks lead to the million dollar separation after 30 years.
So,if you believe in this new way of thinking,and are ready to follow the model(in other words, REALLY, put that extra money to work for you),then I believe an interest only loan or GEL's power option loan is the way to go,but be careful.
For more info on this new philosophy,go to http://YourBigHouse.com
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