Yep that's right I say that with bold bravado and as a real estate investor myself. The general public and many in the real estate industry themselves have been trained to look at interest rates. All we ever see in the media is rates, rates, rates and more rates. Well there is something to be said for interest rates, they don't mean anything.

I myself am looking at a few loan-pricing scenarios for some investment property and will be going with the interest only option at 8% (today's 30 year fixed was about 6.35% and 1 point for $320,000 loan for comparison). I can almost hear the collective jaw dropping as I state this (you mortgage brokers must be loving me and yes the broker who gets ALL of my business now is also the broker who educated me on the intricate workings of money and interest rates. Something that surprisingly enough I've found that many in the industry for whatever reason shuns this new vision, this new way to look at their clients' money.

Let me clarify this by saying that the rates themselves are relative. Meaning that when the cost of borrowing is low then the benefit of saving is low and vice versa. So when interest rates on mortgages are say above 10% then you will also get a nice return on that little 12 month CD as well. So when rates are low it costs little to borrow and rack up debts and then when rates are high it just costs a little more on a relative basis. Relative is the key word here.

Let's look at just the numbers here for a moment. 95% of all mortgages are refinanced within 5-7 years; we in the industry know this to be fact. So I will assume that I am going to keep this mortgage for 6 years before I refi or 1031, partner out or whatever the case may be. Looking at my 30 year fixed rate loan after 6 years I will pay $98,502.30 in interest money (I can hear the CPAs now talking about all those great write-offs there). So when it comes time for me to exit this deal (and let's also assume the worst case that there's been no appreciation over that time) I will pocket a whopping $178,502.30 cash to move onto the next deal. Not too bad, but wait, there is a better way.

With my new system of debt management I will pay $98,755.53 in interest monies. However I will have been guided to move my money in such a way that my principle balance will only be $145,088.62 allowing me to pocket $254,911.38 a nice little difference of $76,409.08 whereby my money will be working for me at all times. How can I achieve such phenomenal results you might ask? Well that's the rub (my secret) that I am more than happy to share with the curious info-seekers and moneymakers.

Just imagine the sort of power you could have as a real estate agent or loan officer to talk to your client and show them how 1. Interest rates don't matter and 2. You'll put more money in their pocket then you competition. Do you think that is something people would like in this day and age? As an investor I'll take more money in my pocket 8 days a week! I mean we talking about EXTRA $76,000 cash in my pocket and that's if the market goes nowhere (what if there is a little turnaround? I won't mind).

Hence the rates on the loan don't matter but how you work the repayments that will matter more in the end. The media gets us focusing so much on the rates when they mean little over the long run versus the amount of money that leaves your pocket and comes back in.

mattm4re