Leverage your mortgage

rfujiwara · Joined: 17 Sep 2005 Posts: 1

How to Use Your Mortgage to Dramatically Increase Your Retirement Savings.

Did you know that your mortgage can be used to dramatically increase your retirement savings? There are many ways to use your mortgage as a financial tool, but one of these ways that is most overlooked is that of using your mortgage to help you increase your efforts of preparing for retirement. The most aggressive of these methods has it’s root in a business fundamental that is taught in graduate and undergraduate advanced business programs throughout the nation. This fundamental is called the “Time Value of Money”. This fundamental has many variations and has been used in many different financial applications. For the purpose of mortgages and financial planning we will paraphrase this fundamental. The Time Value of Money states that a dollar today is worth more than it is at any time in the future.
This can be seen through signs of inflation. A dollar in 1930 had incredibly more purchasing power than a dollar has in present times. You could have purchased more with that dollar in 1930 than you can with the same dollar in present times. So if you had $100 today and invested it at 10 percent a year then after one year you would have $110. Compound this same investment over five years and you will have $161.05 that is a gain of over 60 percent. If you had not had that hundred dollars at the beginning of the five years but instead was promised it by someone at the end of the five years then at the end of the five years all you would have is $100. So the future value of that initial $100 could have been over 60 percent higher than over the course of the five year investment.
Your mortgage should be looked at in these same respects. The bank who holds your mortgage is promising to give you a piece of tangible property, your house, in 30 years or whatever the term of your loan in exchange for payment in dollars to be received in installments. These payments or installments that you make every month without fail could be invested in a number of different ways with a qualified financial planner. At the end of the term of your loan if you had given the payments to the bank then you would have a house that may or may not have appreciated in value, but the interest paid on the house will never equal the value the property may have accumulated in the term of the mortgage loan. But these same payments invested over the same time period could have purchased the property at it’s future value with money to spare. (Enough to retire on!)
Now I know that most people can’t get around the fact that a mortgage payment is something that they can’t avoid. This is inevitable it’s just a fact of life. But how can we reduce our mortgage payment enough that we are not in danger of being foreclosed upon so as to free up capital to invest in more lucrative areas. The fact is there are many mortgage programs out there that cater to this very idea. These programs are given the term Cash Flow Arms, and if used correctly these can become avenues to the process of wealth building. It’s called redirecting capitol large corporations do it everyday. If it has been successful for corporations all over the nation don’t you think that it’s important enough to consider for inclusion in your own financial strategy?

David · Joined: 19 May 2004 Posts: 703

Since I'm sure your main purpose here was to help others with this wonderful information, I hope you don't mind that I deleted the contact information from the bottom of your post. As you become a regular here, we'll be happy to let you post a link to your website in the signature.

Haplo · Joined: 20 Jan 2005 Posts: 2406 Location: Springfield, IL

Quote: If it has been successful for corporations all over the nation don’t you think that it’s important enough to consider for inclusion in your own financial strategy?

And how many corporations fail because they are not properly educated and people wanted to go out and do the next big thing?

It's not as big of a difference as everyone likes to think that it is. You have to consider that yes you may make an increase on that investment, however you may also lose it through poor planning and poor strategy. The interest you pay on your house compounds quite religiously every single month, and that is a number you *know* is guaranteed. You don't know about that 10% figure you pull out of thin air and hope stays for you.

Not to say this can't work, because it can. But once again, the average invester doesn't know how to play the market and the average invester will lose.

dsickler · Posted: Sun Sep 18, 2005 7:54 am Post subject:

I too agree that leverage can be a great thing. Many believe that a mortgage is a risk that should be eliminated as soon as possible. The truth is, carrying a mortgage doesn't cause you to lose money at all, just the opposite is true. Carrying a mortgage is actually quite profitable.

It's eliminating the mortgage that forces you to give up profitable opportunities.

However, it's must first be understood. And a huge overlooked part of this type of concept is: Where should you put the capital that you are freeing up? That is a huge part of what can make all the difference. Would you put it in your 401k or other qualified plans, only to be taxed on it later. Or in a tax free environment, like life insurance.

Education is key to understanding your mortgage and your retirement. Which is why my company is offering a Free Home Buying and Financial Planning Seminar. Before anyone does anything, they should first consultant a mortgage expert or financial planner and get educated. But most importantly, they should not believe the expert just because they say their right, but only because the facts support the advice.

David