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Summer 2010 - a suggestion to become free!

Mortgage and Lending with Mortgage Intelligence Mortgage Consulting


Seems to be 2 types of people this year...folks with non stop vacations and those of us who will work work work through the summer.  Hard to say what is motivating so many to leave home every second possible...but I can make some guesses about why folks are staying at home.

Its not really hard to find folks struggling under weight of debt or struggling to meet a financial goal nowadays.  They are working to pay the man...and thats it.  When will they start working to pay themselves?  I have a suggestion!  Don't let summer 2010 pass you by.  Let me start by attacking a goal I see as primary in the minds of many:

I must pay off my mortgage to $0 as fast as possible

Ever thought that?  Ever believed it to be true for yourself?  Ever pushed yourself to the financial brink to make paying off your mortgage happen?  We all have and i think its time to relax a little...so read on and see what I have to say.

Reasons to relax

1) Your house will probably be worth between 3 and 10 times what it is worth now in 35 years.  Do the math, what was your parents home or your home worth in 1975 ($30,000)?  What is that house worth today (sold for $380,000 in 2008)?  In my situation, the home was worth 12.6X more over 35 years.  Many people have been told that the interest they pay  on their mortgage is wasted money. This is a foolish thought line.  Any asset that can provide a 3X to 10X growth is worth a few dollars in interest - even if it causes you to pay double your initial purchase price.

2) If you starve your family today to payoff your mortgage, YOU WILL end up emotionally and recreationally starved.  Goals are supposed to make life better not worse.  Kids are only young once, vacations should be enjoyed while you can take it all in and you will actually make more per hour in the future than you make now!  The "We can't, we can't we can't", but our mortgage will be paid off in 15 years so we save a few years of mortgage payments 15 years from now really makes no sense.  I appreciate that family can sacrifice for the greater good...but there really isn't any!  Chances are, you will make up to double your salary in 15 years!  In any event, you will make more money then, than you make now, by virtue of inflation.  So the payments will be less as a percent of your total income.

3) The dangers - sky rocketing interest rates and eroding home value.  Yes, these are nightmare scenerios that can happen.  I am not suggesting you pay nothing off on your mortgage, but I am calling for a balance.  A 25 year or 35 year amortization can significatly lower your payments, so more money can go to family etc...and you wont have to rely on credit cards for unexpected expenses.  If house prices erode, is it better for you to lose the equity or the bank? 

To Do - I suggest finding a mortgage lender that allows up to 20% extra lump sum payments per year, but pick the lowest contract payment available.  What this does is allow you to control is how much extra money goes to your mortgage.  Some people use their mortgage as a forced savings plan and it works for them.  At the very least, ask yourself if the approach you are using works for you and  your family.  I would love to help you evaluate your plan and see if your manner of borrowing is the cheapest available for you.  The decision to be curious about this is up to you! 

Best regards