Finally I'm able to discuss one of my cases. I've have of course left out the names, so this particular borrower will go by our beloved name of John and Jane Doe. John lives in hypothetical Bacon, Alabama, and for kicks and giggles 30 years old. John and Jane talk to a mortgage planner and some guy in their neighborhood who told them about some really cool new product called the "Mortgage Checking Account", supposedly it pays down your mortgage in 9 years or less. John comes from the philosophy that you should make equity work for you, but his wife believes NO mortgage is a good one.
So now Billy Planner approaches them with his mortgage plan. He suggests that they get a 5/1 ARM with an interest only rider. This will allow their payments to stay really low at 6.5% interest only, and they can invest the difference in payment into a liquid account that their financial planner would suggest at a later time. This made John happy, but Jane wasn't that excited about the whole idea. It looked good on paper, but there was still this large and nasty mortgage when it was all said and done. Billy also suggested they refinance this mortgage every 5 years, and that at the end of 30 years they'd have more then enough to payoff their home and have a good nest egg for retirement.
The actual numbers looked a little like the following, there homes value grew at a moderate rate of 4.5%, and they're rate of return on their investment was 7.49%. They also could scrape together over $400 a month to put into a retirement account. This was possible thanks to the interest only savings that they realized with their new mortgage. The plan was also to add injections of equity into liquid accounts from equity they harvested every 5 or so years. At the end of 30 years they would have paid a total of $887,048 dollars in interest and loan costs! But they'd have a nest egg of $2,173,143 dollars!! WOW..that's allot of dough. They could then payoff the house, and that would leave them with $1,319,000 dollars in an investment account, and over 37k in equity in their home. John of course loved this whole concept, but his wife wanted to listen to Mike Multilevel.
Now Mike was into anything and everything that he could make multiple levels of income. He had sold pills, lotions, potions and even car alarms. But this one was the best one yet! He could actually show us how to payoff our home in
Now their were some trade offs and benefits to each plan. The first that John noticed was that his total tax burden would be reduced with the
But their financial planner thought of another plan, one that was the best of both the MCA and Equity Harvest plans. A plan that could triple their total investment earnings, soon he was on the phone with John and Jill and another meeting was taking place at their financial planners office.....
TO BE CONTINUED.........
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