Lower Mortgage Payments can Increase Wealth

Creating and maintaining wealth is a very difficult task. Ask any millionaire!!! The delicate balance of living a dream lifestyle and holding expenses tight creates this difficulty. As a financial advisor, I have assisted people accumulate monies to live their dream life while discovering ways to reduce their necessary expenses.

Everyone would agree mortgages are necessary expenses. Probably the biggest expense most of us have. Mortgages present the opportunity to secure income tax deductions while utilizing the house to live.

What if you could reduce your mortgage interest rate to 3% and be required to pay interest only for 5 years? Would you refinance your current house? Purchase another?

While refinancing a client’s mortgage, I discovered such a mortgage. The client will save lots of money the next few years. Here is his scenario:

Client #1$500,000 Loan Amount
Past30 Year Fixed @6.00%=P&I$2,997.75/ month
5th year loan balance$ 456,989.77
Equity (assuming no appreciation)$ 43,010.23
Current
LIBOR ARM@3.00%=Interest only$1,250.00/ month
Applied additional $1747.75 / month to principal for 5 years
5th year loan balance$ 362,370.82
Equity (assuming no appreciation)$ 137,629.18

I proposed this loan program to Client #2.

Client #2$1.2 Million Loan Amount
Current
5/25 ARM@4.25%=P&I$5,903.28/ month
5th year loan balance$1,064,681.48
Equity (assuming no appreciation)$ 135,318.35
Proposed
LIBOR ARM@3.00%=Interest Only$3,000/ month
Applied additional $2903.20 / month to principal for 5 years
5th year loan balance$ 971,261.81
Equity (assuming no appreciation)$ 228,738.19

You can see from these scenarios this mortgage can be a great tool to reduce your monthly mortgage payment or to shave down the loan balance thereby increasing your equity.

This mortgage interest program is termed negative amortization. Rather than paying off the interest over the time period, you are paying of a small portion of the interest but not the required amount. Interest rates can go as low as 1.25%

If you want savings refinance your mortgage.

About the Author

Ida B. Byrd-Hill was the President of The Harvard Group Wealth Management L.L.C. for 10 years. She created investment portfolios, insurance plans and residential/ commercial financing. She is President of Livinginstyleonline.com She has served as guest columnist for the Michigan Front Page for 2 years and a speaker for the Better Investing television show hosted by David Chilton, author of The Wealthy Barber.

TD Bank Financial Group Reports Third Quarter 2008 Results; Raises Dividend (CNW Group via Yahoo! Finance)
TD Bank Financial Group today announced its financial results for the third quarter ended July 31, 2008. Overall results for the quarter reflected solid earnings contributions from TDBFG's personal and commercial banking operations in both Canada and the United States and its Wealth Management segment, while the performance of Wholesale Banking was affected by continuing challenges in financial ...

TD Bank Financial Group Reports Third Quarter 2008 Results; Raises Dividend (PR Newswire via Yahoo! Finance)
Reported diluted earnings per share were $1.21, compared with

Scotiabank earnings top $1 billion in solid third quarter (PR Newswire via Yahoo! Finance)
Earnings per share of $0.98 compared to $1.02 last year and

Escaping financial hell (Stuff)
Living from payday to payday is not ideal. Financial adviser Liz Koh suggests eight steps to freedom.

How to survive the recession (The New Statesman)
The days of easy loans are over and people are having to live within their means. But it is not all bad news. Iain Macwhirter on the lessons for the government, and what you can do

Home page

Information Index