370 Years Later
Five years ago a client challenged me. He asked me whether he should put down 5% or 25% on his property. I emphatically answered 25%. Why was this my initial response? It was the only way of avoiding the 2-3% in CMHC fees (insurance required on all mortgages of 75% or more of the property value at the time) that it would cost him up front.
“If I took that 20% and used it as a down payment what would it cost me?” he asked.
“Nothing, it would save you not only the CMHC fee, but also the interest you would have to pay on the excess money if you borrowed it,” I replied.
“Are you sure about that?” he asked.
“Well I guess you would in theory lose whatever interest you could earn on that money.”
“Exactly!” He replied. However, I still was not sold. I was still stuck on the fact that he would be giving up that initial fee, an insurance premium designed to protect the bank, not the client. I argued for nearly 50 minutes, not because I had worked the numbers out myself, and not because there wasn’t distinct evidence against my opinion.. I argued and dismissed his idea similar to the way in which the religious authorities dismissed Copernicus and Galileo, simply because my financial mentors, at some point in time, had told me that it was better to put more money down when buying a house to avoid the mortgage insurance premiums. Someone had established this idea in my mind and it had become entrenched, but not because it was correct.
Similar to the case of Galileo, I first had no reason to doubt the customer other than the fact that someone had previously told me an opinion that I perceived as a fact. Second, even though he had evidence to backup his argument, I defended mine, even though I had no empirical evidence to support my belief. Third, I eventually realized his opinion had validity, which led to the removal of my financial blinders. The Mortgage Insurance Avoidance Debate chapter in this book, was derived from this very conversation.
The point to both of these short stories is to begin this book by helping you open your eyes to other lines of thinking, so that we can break down the fallacies of personal finance and debt.
Just as Galileo’s convictions in his beliefs motivated him to fight an uphill battle, this book will do the same. We will explore the parallels between ideas such as “the world stands still,” and “pay off your mortgage as fast as possible,” and investigate how ideas passed along from generation to generation carry important wisdom, yet should not necessarily be accepted as facts.

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ex. If you make a combined $10000 in your household, $3200 can be applied to mortgage payments and an additional $1000 can be used for other debt payments. if you have $2000 in other debt payments then you would be able to apply $2200 to your monthly mortgage payment, as long as your total debt payments with your mortgage do not exceed 42% of your monthly income.

Making this decision depends on your individual situation and should not be taken likely. First of all, every other piece of debt you have should be paid off first unless it is at a lower rate than your mortgage. There is no point in having clear title on your house if you have $10000 in credit card debt at 19% interest.

If you are the type of person who is good at saving money for the future, you may even want to use your mortgage as leverage to increase your savings. If you can consistently make 12% interest on your investments and are only paying 6% on your mortgage there is obviously an advantage to making the monthly payments rather than abolishing them. Of course you have to be willing to make the payments and have the ability to carry the debt load.

I believe this goes back to the old medical metaphor. Would you let someone who isn’t a doctor perform open heart surgery on you? No. So why would you buy a house without the advice of an expert? People have no idea just how much work a realtor does to protect you, use one! You won’t realize the value behind it until something goes wrong, and then you will be sorry you didn’t.

You can read the RealUmbrella story here.

The slightly more complex answer is that any time a bank can get a client to do renovations it is in the banks best interest. It ups the resale value of the property and increases the value of the banks security.

Don’t worry, its not just you. These days every time you hear the word finance, credit or housing they are accompanied by the word crisis. This doesn’t have to be the case. Now you can learn the secrets to turning the tables on the market and exploiting your mortgage for all its worth. Its time to stop thinking crisis, and start thinking opportunity.

From acclaimed author of the best selling business-life balance book Golf Balls Don’t Float, Nolan Matthias is excited to present you with the tools to use your mortgage to get rich. The Mortgaged Millionaire is a hard hitting, strategy filled book with an insider prospective on how to turn your mortgage into a highly efficient wealth-building vehicle.

“We are currently knee deep in the financial crisis…” notes Investopedia.com, and there is no telling how much longer things will stay this way. But why sink, when you can swim. The Mortgaged Millionaire will change your attitude, improve your situation and transform your thinking on how far mortgage debt can take you. The Mortgaged Millionaire is an indispensable guide to helping you through the downtimes and prospering in the good.

The Mortgaged Millionaire is available online, and at bookstores near you on January 15, 2009. Take the plunge, ensure your mortgage is always paid, guarantee no one will ever take away your home, and uncover the secrets to exploiting your mortgage to get rich.

Chapters include; Future Value & The Time Value of Money, Extending Amortization, The Mortgage Insurance Debate, Debt Replacement, and Saver Spender or Struggler.

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80% discount if you order Today.
Just $4.95 plus shipping!