Are You Wasting Money by Accelerating Payments on your Home Mortgage?

By
Mortgage and Lending with Stearns NMLS #232164 CA BRE #01380812 BRE 01380812 NMLS 232164

In this article from Best Life Magazine, a Federal Reserve Board member shows us why (with a complex mathematical model) it's better to invest in your retirement account than to accelerate payments on your home mortgage. 

This is a key strategy that mortgage planners teach their clients.  When you compare the difference between putting more money down on your residence or putting less down and investing your cash in a fully diversified portfolio, and contributing monthly to that portfolio instead of prepaying the mortgage, the numbers show what high net worth homeowners know and have been practicing for years.  It's the difference between just becoming debt free (old strategy of paying off your mortgage) and creating wealth, and being able to pay off your mortgage from your assets.

Certified Mortgage Planning Specialists are trained to advise homeowners on these strategies and more importantly to discern if a homeowner is a candidate for equity management. 

 

http://www.bestlifeonline.com/cms/publish/finance/Tax-Free_Wealth.shtml

Posted by

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Tags:
marin county mortgage prepay payoff wasting money mortgage planning certified mortgage planning specialist mortgage equity management

Spam prevention
Show All Comments
Rainer
91,292
Jimmy McCall
JimmyMcCall.com - Cunningham, TN
The Ex-Mortgage Consultant
Mary Anne,  The one thing Mortgage Planners always forget to factor into the equation is the peace of mind a person has with no house payment.  Yes, the numbers can prove anything you want them to and you can have 5 time the value of your house sitting in an account making 20% interest a year.  But if the goal is for a client to have a paid off house is that not the the Mortgage planners fiduciary responsibility to honor the clients request? 
Mar 24, 2008 01:38 PM #1
Rainmaker
53,782
Mary Anne S. Daly
Stearns NMLS #232164 CA BRE #01380812 - Mill Valley, CA
Queen of the Loan & Radio Broadcaster

Hi Jimmy,

I'm glad you brought that up.  I never forget that.  

I show my clients what is possible because I want them to make a decision based on facts, not their grandparent's model of debt management, which was based on the real fear during the depression that their lender could call the loan due even if grandpa was making on time payments.  

To be able to pay off your mortgage from assets is much better, and I show them why.  But if after being shown how much faster they can accumulate assets and safely pay off their mortgage from those assets, they still would rather focus on paying off their mortgage by accelerating payments or putting more money down on a home, I will be the first to advise them to do so.  I'm not here to promote strategic equity strategies at all costs.

Every client has a different mindset and comfort level and I respect that as you rightfully put it as my fiduciary responsibility, just as I would not recommend strategic equity for a borrower who has not demonstrated good savings habits (the last sentence of my post points that out.) And I use 6-8% when showing returns from a fully diversified portfolio because  I am pretty conservative.  What I do that many other lenders don't is provide a personalized and detailed analysis for each borrower so that they can see for themselves how mortgage planning can benefit them and their whole financial picture.

Having said that, my high net worth clients are the ones who best understand strategic equity management, but they are all grateful for the info.

Thanks for your post.
 

 

Mar 24, 2008 02:00 PM #2
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainmaker
53,782

Mary Anne S. Daly

Queen of the Loan & Radio Broadcaster
Ask me a question
*
*
*
*

Additional Information