Making money and keeping it is a very hard thing to do. Just ask a millionaire! This problem is caused by the delicate balance between living a dream life and keeping costs low. As a financial advisor, I've helped people save money so they could live the life of their dreams while also finding ways to cut their necessary costs. Everyone agrees that mortgages are important costs. This is probably the biggest cost for most of us. With a mortgage, you can get tax breaks on your income and still use the house to live in. What if you could lower the interest rate on your mortgage to 3% and only have to pay the interest for the next 5 years? Would you refinance the house you already own? Buy another one? I found such a mortgage when I was refinancing a client's mortgage. Over the next few years, the client will save a lot of money. Here's what he did:
Client #1: Loan Amount of $500,000
Current
30 Year Fixed at 6% = P&I of $2,997.75 per month.
Balance of loan after 5 years is $456,989.77
Equity (assuming no appreciation) $43,010.23
Past
LIBOR ARM at 3% = Interest of only $1,250/month
Added $1747.75 to the principal each month for 5 years.
Balance of loan after 5 years is $362,370.82
Equity (assuming no appreciation) $137,629.18
Making money and keeping it is a very hard thing to do. Just ask a millionaire! This problem is caused by the delicate balance between living a dream life and keeping costs low. As a financial advisor, I've helped people save money so they could live the life of their dreams while also finding ways to cut their necessary costs. Everyone agrees that mortgages are important costs. This is probably the biggest cost for most of us. With a mortgage, you can get tax breaks on your income and still use the house to live in. What if you could lower the interest rate on your mortgage to 3% and only have to pay the interest for the next 5 years? Would you refinance the house you already own? Buy another one? I found such a mortgage when I was refinancing a client's mortgage. Over the next few years, the client will save a lot of money. Here's what he did:
Client #1: Loan Amount of $500,000
Current
30 Year Fixed at 6% = P&I of $2,997.75 per month.
Balance of loan after 5 years is $456,989.77
Equity (assuming no appreciation) $43,010.23
Past
LIBOR ARM at 3% = Interest of only $1,250/month
Added $1747.75 to the principal each month for 5 years.
Balance of loan after 5 years is $362,370.82
Equity (assuming no appreciation) $137,629.18
Client #2: Loan Amount of $1.2 Million
Current
5/25 ARM at 4.25 percent equals P&I of $5,903.28 per month.
The loan balance after 5 years is $1,064,681.48
Equity (assuming no appreciation)
$ 135,318.35
Proposed
LIBOR ARM @ 3% = Only $3,000/month in Interest
Added $2903.20 per month to the principal for five years
The loan balance for the fifth year is $971,261.81.
Equity (assuming no appreciation)
$ 228,738.19
From these examples, you can see that this mortgage can be a great way to lower your monthly mortgage payment or pay off your loan faster, which will increase your equity. This programme for paying down a mortgage is called negative amortisation. Instead of paying off the interest over time, you are only paying a small amount of it. The lowest interest rate is 1.25 percent. If you want to save money, you should change your mortgage.
