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By Ida Byrd-Hill
Creating and maintaining wealth is a very difficult task. Ask
any millionaire!!! The delicate balance of living a dream
lifestyle and holding expenses tight creates this difficulty.
As a financial advisor, I have assisted people accumulate
monies to live their dream life while discovering ways to
reduce their necessary expenses. Everyone would agree
mortgages
are necessary expenses. Probably the biggest expense most of
us
have. Mortgages present the opportunity to secure income tax
deductions while utilizing the house to live. What if you
could
reduce your mortgage interest rate to 3% and be required to
pay
interest only for 5 years? Would you refinance your current
house? Purchase another? While refinancing a client’s
mortgage,
I discovered such a mortgage. The client will save lots of
money
the next few years. Here is his scenario:
Client #1 $500,000 Loan Amount
Current
30 Year Fixed @ 6.00%=P&I $2,997.75/ month
5th year loan balance $456,989.77
Equity (assuming no appreciation) $43,010.23
Past
LIBOR ARM @ 3.00%=Interest only $1,250.00/ month
Applied additional $1747.75 / month to principal for 5 years
5th year loan balance $362,370.82
Equity (assuming no appreciation) $137,629.18
Creating and maintaining wealth is a very difficult task. Ask
any millionaire!!! The delicate balance of living a dream
lifestyle and holding expenses tight creates this difficulty.
As a financial advisor, I have assisted people accumulate
monies to live their dream life while discovering ways to
reduce their necessary expenses. Everyone would agree
mortgages
are necessary expenses. Probably the biggest expense most of
us
have. Mortgages present the opportunity to secure income tax
deductions while utilizing the house to live. What if you
could
reduce your mortgage interest rate to 3% and be required to
pay
interest only for 5 years? Would you refinance your current
house? Purchase another? While refinancing a client’s
mortgage,
I discovered such a mortgage. The client will save lots of
money
the next few years. Here is his scenario:
Client #1 $500,000 Loan Amount
Current
30 Year Fixed @ 6.00%=P&I $2,997.75/ month
5th year loan balance $456,989.77
Equity (assuming no appreciation) $43,010.23
Past
LIBOR ARM @ 3.00%=Interest only $1,250.00/ month
Applied additional $1747.75 / month to principal for 5 years
5th year loan balance $362,370.82
Equity (assuming no appreciation) $137,629.18
Client #2$1.2 Million Loan Amount
Current
5/25 ARM @4.25%=P&I $5,903.28/ month
5th year loan balance $1,064,681.48
Equity (assuming no appreciation)$ 135,318.35
Proposed
LIBOR ARM @3.00%=Interest Only $3,000/ month
Applied additional $2903.20 / month to principal for 5 years
5th year loan balance$ 971,261.81
Equity (assuming no appreciation)$ 228,738.19
You can see from these scenarios this mortgage can be a great
tool to reduce your monthly mortgage payment or to shave down
the loan balance thereby increasing your equity. This mortgage
interest program is termed negative amortization. Rather than
paying off the interest over the time period, you are paying
of
a small portion of the interest but not the required amount.
Interest rates can go as low as 1.25%. If you want savings
refinance your mortgage.
About The Author: Ida B. Byrd-Hill is the President of Uplift
Inc.and www.livinginstyleonline.com. She was the
President of The Harvard Group Wealth Management L.L.C. for 10
years. She has served as guest columnist for the Michigan
Front
Page for 2 years and a speaker for the Better Investing
television show hosted by David Chilton, author of The Wealthy
Barber.
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