Following Conventional Wisdom Could Cause This Fatal Million Dollar Mistake
Conventional Wisdom States Buy a House
Get a Fixed Rate Mortgage and Make Extra Payments
to Pay Your Mortgage off as Fast as Possible. If you
follow Conventional Wisdom you will be making a Million
Dollar Mistake. Keep Reading to find out why.
(This Example is Similar to one Used
By Ric Edelman in his New York Times Best Seller the
Rules of Money)
You have a good job and you decide it
is time to buy your first home. You find the Perfect
Home in the Perfect Neighborhood. It is a $200,000
Home. If You follow Conventional Wisdom you will purchase
that $200,000 Home with 20% Down. You will get a 15
Year Fixed Rate Mortgage at 5.25%. Your Monthly payment
would be $1286 a Month and you pay an Extra $100 so
you can pay off your Mortgage Early.
The Unconventional way Get a 30 Year
Interest only mortgage (Interest Only for first 15
Years then Fully Amortized over last 15 Years) with
a 5% Down Payment. Your Monthly Payments are $970
all of which is Tax Deductible and you have $30,000
leftover to invest. (The rest of this Example assumes
you will invest your After Tax Savings and the $30,000
at 8%)
At the end of 15 Years Using the Conventional
Method your House would be paid off and you would
have almost $28,000 in Savings and Investments. (Remember
you paid an Extra $100 a Month to pay off your mortgage
Faster. You are now Investing your Total Monthly Mortgage
Payment plus that $100 at 8%)
At the end of 15 Years with the Unconventional
Method you would still owe $190,000 on your house
but you would have over $300,000 in savings and Investments.
(Enough to Pay off your Mortgage if you want too and
still have over $110,000 in your Pocket)
At the End of 30 Years using the conventional
method you would owe your home free and Clear and
you would have slightly over $570,000 in savings and
investment. You would have saved almost 21,000 in
Taxes
At the End of 30 Years using the Using
the Unconventional method you would own your home
free and clear and have slightly over $1,220,000 in
savings an Investment. You would have saved over $88,000
in Taxes.
Let's Assume that the $570,000 and $1,220,000
Continue to Remain Invested at 8%. In 5 Years the
$570,000 Would Grow to just under 838,000 the $1,220,000
Would Grow to Just Under $1,793,000. A Difference
of Almost $1,000,000. In 5 More Years the Difference
would grow to over $1,400,00. By Listening to conventional
wisdom you have now lost well over $1,000,000 Dollars
About the Author
Mike Makler is a Financial Consultant in the St Louis
Missouri Area Specializing in Real Estate Loans and
Annuities. To Learn More Call Mike at 314 398-5547
or Visit Mike's Web Page: http://ewg
uru.com/finance
Get Mike's Newsletter Here http://ewg
uru.com/fin-news
Copyright 2005-2006 Mike Makler
