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Equity Repositioning
Read on and let the following information about equity repositioning sink in.
Please ask yourself the question: How much would you deposit in the following investment account?
If you haven’t guessed by now, this is your mortgage. It’s hard to believe that for years we’ve felt so secure about our equity and its safety, yet the truth is a far cry from the reality.
WHY PAY OFF YOUR MORTGAGE IN HALF THE TIME?
Most homeowners have the misconception that the wisest method to accelerate the pay-off of their home is to simply pay extra principle payments on their mortgages. Other homeowners are lured into thinking that bi-weekly mortgage payment plans are the answer. Still other homeowner’s utilize a 15 or 10 year mortgage amortization. In actuality, none of these methods usually proves to be the wisest method to accomplish “free and clear” home.
You can accumulate sufficient cash in a conservative tax-deferred mortgage acceleration plan to pay off a home just as soon or sooner than utilization the methods described above. In addition you can accomplish your goal of paying off your home just as soon (typically in less than half the time) plus you will have the following advantages: 1) Maintain Flexibility, Liquidity, and Safety of Principle by allowing the equity to grow in a separate side fund where it is accessible in case of emergency, temporary disability, or unemployment. 2) Maximize the only real tax-deductible interest allowed by tax reform by keeping the loan balance as high as possible until you have the cash accumulated to pay off your home in a lump sum. In a typical tax bracket (25-35) you have the cash accumulated to pay off your home in a lump sum. In a typical tax bracket, you can actually pay off a $100,000 30 year mortgage in 14 years partially using $22,000 of Uncle Sam’s money instead of your own money as with the methods described above. 3) Maintain control of your home equity, increase its rate of return and keep the equity portable. Most homeowners relocate every seven years. Your home will likely sell much easier with a high mortgage balance rather than a low mortgage balance and your equity should always be kept highly liquid regardless of real estate market conditions.
Advice and proper management of home equity to increase liquidity, safety, rate of return and tax deductions is what every homeowner in America needs.
Common Myth: equity in your home provides safety. Well, equity does provide safety of course. The problem is, the safety it provides is for the lender, not for you. That is, as a homeowner I don’t want to lose my home if I cannot afford to make a mortgage payment. Therefore, I may believe that more equity, the lower the mortgage, and the lower the payment, the safer I am. Here is the flaw in that argument. Equity cannot make a mortgage payment, ever! Mortgage payments are made with cash, not equity.
On the other hand, if I am a bank, and you cannot make your mortgage payment, you have lots of equity parked in your home, and you can count on me (the bank) going after it. You see the irony here is that the safety the homeowner feels he or she has in their equity is actually safety for the lender in the event of foreclosure and it provides no safety for you. The more equity you have in your home the safer the lender and the less safe you are!
AVOID THE TRAP THAT ENSNARES MILLIONS OF AMERICANS!
Common Myth-conception: The best way to pay off a home early is to pay extra principle on your mortgage. Reality: No method of applying extra principle payments to your mortgage is the wisest or most cost-effective way of paying off your house.
Avoid expensive risks. Position yourself to act instead of react.
Common Myth-conception: Home equity is liquid. Reality: When you need it most, you may not have it. Home equity is usually non-liquid.
Real properties with high equity and low mortgages get foreclosed on the soonest and fastest.
Common myth-conception: Homes with a lot of equity are less subject to foreclosure. Reality: Homes with substantial equity are usually the first ones mortgage bankers foreclose on if their mortgages become delinquent. Lenders are very willing to work with people who have no equity in their home because the bank is in a position of losing money in the event of a foreclosure sale.
TRUTH: No matter where your property is located, the return on equity is always the same- ZERO!
Common Myth-conception: Home equity has a rate of return. Reality: Equity grows as a function of real estate appreciation and mortgage reduction; however, equity has no rate of return.
Mortgage interest-friend or foe?
Common Myth-conception: Mortgage interest is an expense that should be eliminated as soon as possible. Reality: Eliminating mortgage interest expense through traditional methods eliminates one of your best partners in accumulating wealth and financial security… Uncle Sam and his mortgage interest deduction.
Turbo charge your wealth growth rate!
Common Myth-conception: Borrowing funds at a particular interest rate, then investing them at the same or lower interest rate, holds no potential growth returns. Reality: You can earn a tremendous profit-regardless of the relative interest rates-by positioning your money in a tax-free interest-compounding investment that earns return greater than the real net cost of obtaining that money.
Increase your net worth by separating your home equity and putting those idle dollars to work.
Common Myth-conception: Equity in you home enhances your net worth. Reality: Equity in you home does not enhance your net worth at all. Separated from your home, however, it has the ability to dramatically enhance your net worth over time.
What is the IRS really saying?
Don’t lose out on thousands of dollars; understand what the IRS is actually saying! Common Myth-conception: To avoid capital gains tax, you have to use as much as possible of the cash proceeds from the sale of a previous residence in purchasing a new home. Reality: Under the Taxpayer Relief Act of 1978, a married couple may exclude up to $500,000 (up to $250,000 if unmarried) of the gain on the sale of a principal residence. This exclusion can be used once every two years. Not one dime of equity from the former home needs to be put into the newer home to avoid taxation.
Don’t lose out on thousands of dollars; understand what the IRS is actually saying!
Common Myth-conception: To avoid capital gains tax, you have to use as much as possible of the cash proceeds from the sale of a previous residence in purchasing a new home. Reality: Under the Taxpayer Relief Act of 1978, a married couple may exclude up to $500,000 (up to $250,000 if unmarried) of the gain on the sale of a principal residence. This exclusion can be used once every two years. Not one dime of equity from the former home needs to be put into the newer home to avoid taxation.
Pay No Money Down
Alleviate cash down payments when purchasing real estate Common Myth-conception: You must always pay cash down when you purchase real property.Reality: There are many ways to purchase real property with out paying cash down.
Alleviate cash down payments when purchasing real estate
Common Myth-conception: You must always pay cash down when you purchase real property.Reality: There are many ways to purchase real property with out paying cash down.
House Rich, Cash Poor
Elderly homeowners can generate tax-free retirement income using a mortgage and a liquid, safe, side investment that the IRS treats differently than almost all other investments. Common Myth conception: Financial security is, to a large degree, achieved when your home is paid for. Reality: Financial security is usually obtained with adequate liquid assets in a safe environment to cover any liabilities and generate positive cash flow to cover living expenses indefinitely.
Elderly homeowners can generate tax-free retirement income using a mortgage and a liquid, safe, side investment that the IRS treats differently than almost all other investments.
Common Myth conception: Financial security is, to a large degree, achieved when your home is paid for. Reality: Financial security is usually obtained with adequate liquid assets in a safe environment to cover any liabilities and generate positive cash flow to cover living expenses indefinitely.
Accumulating, Accessing, and Transferring Your Money Tax Free
Common Myth-conception: Life insurance is not a good place to accumulate and store cash, and is a poor investment. Reality: Modern cash-value life insurance can be designed to accumulate and store cash safely, provide tax-favored living benefits, and deliver tax-favored death benefits – all while safely maintaining liquidity and earning an attractive rate of return. Avoid believing old, outdated advice as truth for today.
Choose Investments That Generate the Most
Choose financial instruments that generate or provide the most money at the time in life you will likely need the money the most. Common Myth-conception: Wise investors choose investments that accumulate the most money. Reality: When considering tax effects, greater growth investment vehicles may be inferior to other investments. Choose investments that generate the highest net spend able income. Do you want more money in your pocket or better looking investments on paper?
Choose financial instruments that generate or provide the most money at the time in life you will likely need the money the most.
Common Myth-conception: Wise investors choose investments that accumulate the most money. Reality: When considering tax effects, greater growth investment vehicles may be inferior to other investments.
Choose investments that generate the highest net spend able income. Do you want more money in your pocket or better looking investments on paper?
Increasing Your Net Spend able Retirement Income
Proper home equity management, coupled with your retirement planning, could significantly increase your net spendable retirement income. Common Myth-conception: Home equity cannot safely be used to supplement retirement income. Reality: Through careful planning, home equity can be properly used and managed (in a safe environment) to increase net spend able retirement income by as much as 40-50%!
Proper home equity management, coupled with your retirement planning, could significantly increase your net spendable retirement income.
Common Myth-conception: Home equity cannot safely be used to supplement retirement income. Reality: Through careful planning, home equity can be properly used and managed (in a safe environment) to increase net spend able retirement income by as much as 40-50%!
For more information Equity Repositioning, please email info@MeadTaylorFinancialGroup.com or call 206-287-5762!
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