Credit cards were designed to allow someone to spend money on various
items, from home goods, to clothing, to vacations and meals. They were also
designed to be paid back for your items at the end of each month. When they
started to let people pay a monthly fee based on your balance on the account, instead of paying in full, the credit card industry became of age.
Now people carry balances that rival second trust deeds in size and for some
balances that are equal to home mortgages. The reason for the growth of balances comes from the fact that most people must wait until the credit card(s) bill(s) arrive each month. Once they see how much they spent they generally opt to pay the minimum on the bill, or the minimum and a bit more.
Before I get into a better plan than I outlined above I want to give notice I am not
your Father and I am not against what you do with your money. I do,however, want to show you a problem with your way of paying,and show you a better way.
When you pay your credit cards with your cash that is in your account you are paying for the purchases with AFTER TAX money. If you earn $100 and are in the
20% bracket you will have $80 after you pay the $20 tax. An $80 charge will actually cost $100 to pay back.
If you were to borrow money on your house, a new first mortgage plus a stipend
to pay bills, then you would pay your credit card bills with Before Tax dollars.
Not only is it before taxes it is actually a tax shelter as the interest on the extra
money you borrower is a write off. If you borrow a $100 you pay interest on it
and that interest lowers your income tax. In the 20% bracket you would only
pay $80 on the bill with the other $20 going to pay your tax.
How much would you save? $40 dollars because you use after tax income instead of before tax income. If your credit card bill was $1000 you would save $400.
How do you make it work? Take enough out of your house that will cover a few months of your payments. Make sure that you take some earnings each month
to replenish your monies for the credit cards. After a short while you will be in
charge with a better way of paying your bills.
This morning the Consumer Price Index came out with a .04% increase in prices. However when
you take out the food and energy for the month of April, the index still was in the .02% range which means virtually an economy without much inflation. Nevertheless the Federal Reserve was concerned about the headline and is still considering raising the interest rates as early as June.
I had to laugh about the Fed’s conclusion on inflation. When I first entered the real estate industry
back in the 70’s I was syndicating small shopping centers with a couple of partners. I did the leasing and in every lease we had we had a minimum of 5% increase and a maximum of 10% increase either every 6 months or a year, depending on the lease. That is more than 10 times higher than the .04% that came out today and that was the minimum raise, not the maximum.
Now before I give you my conclusion I must tell you that the average home interest rate was about
7% in the 1970s, while we currently have rates in the high 2% to 3% range. There has been a lot of house cleaning in the financial industry since the early 1970’s and a lot of items were taken out of the consumer price index. The one that had to go was the mortgage interest rates which were
highly influencing the consumer price index, and being influenced as well.
There are two things to learn today: how low the mortgage rates are, and what changes are made over the years to produce a better index. Once you realize this is not your father or mothers’ mortgage market you should give yourself some permission to wander about and try to find a better financial situation for you in today’s financial markets.
We are here to help!
In these United States we are in a position to add wealth to those individuals
who are willing to put in a little effort and a lot of understanding. In the mortgage
market we are having a real sale, that can make you some large green bills if you
are desirous of that type of outcome. One is the interest rates and the 2nd is the
tax advantages on the sale of the house.
It is simple: low rates allow you to get a bigger property and the current tax code
on selling your owner occupied house if very accommodating. These two items can
get you into a house and out of it in 2 years with a profit that is tax free to a certain limit.
My job is to get you excited about your new found wealth that is waiting for you. Your
job is to find out from us how to do it and in a couple of years you can count your new found
I am leaving it up to you!! Call or Write!
I am a senior citizen and know quit a lot about mortgages and finance. I believe that
a reverse mortgage is the best thing the Government has done since allowing any Veteran
the opportunity to buy a house with zero down payment and also be able to take and refinance their current loan to 100% of the V.A. limits in their area. Consumers at least
recognize that reverse mortgages have been around for a long time but will accept almost
anybody’s criticism of those loans.
The two best reasons for getting a reverse mortgage if you are at least 62 years of age and
own a house with some equity in it, are qualified for the loan if you have the age and enough equity in your house, and you do not make any payments on the reverse as long as you reside in your house.
When you get your reverse mortgage you are either trading in your current mortgage for a reverse mortgage that will accrue interest until you leave the house whether at the end of your life or you have decided to sell, trade or have given the house to one of the heirs before your ready to leave the house. If that happens the balance on the reverse must be paid and the house reverts back to the owner or his heir or the buyer of the property.
If your house was free and clear when you took out your reverse mortgage you would receive a portion of your equity in cash or in a line of credit which isn’t ever paid back until what I outlined in the previous paragraph happens.
Now you really know what happens and how it works and owning a reverse mortgage doesn’t raise your insurance, makes you get less of your social security on a monthly basis
or any other scenario. When these are the results then you need to understand why you need a reverse mortgage.
Any by the way your house still can increase in value when you have a reverse mortgage.
In fact most of the houses rise faster in value than the mortgage that is accruing. Before you sign your loan you will have an estimate of the increase in your home in the future and the total increase in the mortgage as the interest accrues.
You owe it to yourself if you are a senior to look at and understand how this vehicle works. It just might be the best loan you have ever seen. My next article will highlight why you
probably need a reverse mortgage! Stay focused.
Have you ever gone to a cocktail party and overhear several people discussing who has the lowest interest rate on their mortgage. If you ever thought this was strange you couldn’t be smarter about it if you were a financial gur. It would not be out of place to discuss the length of your mortgage, with the shorter length the one who should be bragging, but in reality nobody should be too happy about that situation for one reason: a mortgage is a DEBT, not an ASSET.
I bring this up because consumers really know very little about mortgages, and most follow their parents example when entering the mortgage market. Little did they know that their parents didn’t have much of a choice when they got their first mortgage. The mortgage market 40 years ago or longer was similar to the Ford Motor Company who stated you can have any color on our automobile as long as it was black. Forty years ago or longer your choice was almost only a 30 year loan. But not any more!
At this point in this blog you might think I would start discussing the various loans, but I won’t bore you with that. Instead I will discuss how to avoid mortgages or at least keep them short and sweet. A very small number of people buy their first house with cash, unless they are professional athletes, entertainers, inventors, etc. or lottery winners. The vast majority will need mortgages.
At this point I want to show how you can minimize your first mortgage. It starts with being pe-qualified before going looking for a house. Learn quickly that everything above what the mortgage professional feels is your mortgage maximum limit will hurt you in ways you would never think about.
1. If you try to buy too much house you probably will have to add years to your
loan to be able to qualify and comfortably pay your monthly mortgage. That means
more interest for a longer time, and less principal pay down.
2. You need to recognize the current tax advantages in a mortgage combined with
the house you are buying. We have the ability to deduct our mortgage interest
and get tax free cash when we sell our owner occupied house that you live in
for a minimum of two years.
3. It is important to realize the aforementioned tax breaks can be changed at any
time by the Government. This should inforce your resolve to pay attention to
number 1 above.
All great successes generally come from those who understand what they are doing and
continually go over their methodology to make sure they are on the right page! Try it and
enjoy your success.
The U.S. Bond market is rallying and the yields are falling. These yields are the benchmarks for our mortgage rates and therefore the title of this blog is right on target.It is time to start changing your financial life from “carrying on” to getting it done. I accept no excuses for lack of action but you are the one who really shouldn’t accept any excuses. I will tell you why.
Most mortgage advertisements on the radio or television speak to those who hold 30 year loans.
The rates on 30 year loans are way down and they want you to refinance your current loan to a new 30 year loan and earn lots of money and praise from your friends. It seems like the right move because your new monthly payment will be lower; thus the savings. WRONG!
Whether you have had your 30 year loan for 3 years, 7 years, 12 years etc. your refinance will get you another 30 year loan. You do not get credit for the years of interest that you have paid. At the end of your new refinanced loan, 30 year from now, you will see how much money you have lost. Don’t kid yourself about selling the house in 5 years and then it won’t be as awful as I am telling you. If you really care look at the amount of principal you will pay off in 5 years on your current loan and compare how much you will pay off on your new loan and you will find a big shock waiting!. That is all I am going to say about the wrong way.
A 30 year loan takes about 19 years to pay off half of it. A 15 year loan a bit longer than 8 years.
A 30 year loan carries a higher interest rate than a 15 year loan. You will be done with your 15 year loan in half the time of a 30 year, and if you paid yourself the same payment during the second 15 years you would have all your money back when your old 30 year would be over.
The 15 year loans are in the mid 2% range right now. That alone should make you move to a 15 year loan. However, most homeowners won’t do it because of the higher monthly payment that comes with the 15 year loan. We can get a 15 year loan at the SAME PAYMENT that you are making on your 30 year loan.
There are 3 ways to accomplish keeping the same payment on the new 15 year loan as you had on the 30 year loan. The first way has to do with your current interest rate, how long you have had your 30 year loan and your current loan balance.
The second way has to do with your current liabilities that are paid on a monthly basis.
The last way has to do with our knowledge of the mortgage industry.
Call or write us and let us show you how we can get this done for you. Now is the Right Time
to move on this because rates do change without notice!
I am sure that the Government, that group in Washington, never thought to put a “Makes Sense Meter” when making laws. It would be easy and that alone would make them hesitate, table it and maybe get it right for a change. How would it work? I envision a computer that would read the future bill, sleep on it, which means feed it into two more computers and let the majority opinion go forth. The results would be given to the American public and would be one of the following:
Marginal, Nearly There, Close Enough, Not Even Close or Nonsense.
I suppose it could also have Good or Excellent, but I can’t imagine a computer which is lacking a bias, or emotion, ever reaching the good or excellent level.
I bring this up because our nation is slightly (just kidding) out of money. Actually if our Nation was
a person they would be visiting homeless shelters looking for nice bed by a window. We owe $19
Trillion to others and before you try to figure that out it will be climbing the $20 Trillion plus column.
That doesn’t include our non-funded pension liabilities, etc.
AND now to the crux of my blog. The Government is giving away “ship” in the housing market by allowing every single person who has lived in their owner occupied house for two years to sell the
house and pay no tax on the first $250,000 in profit. If you are married you get to pay no tax on the
first $500,000 of profit.
I do not feel sorry for the Government, even though they are us. I feel sorry for those who have the opportunity of a life time and either don’t know the law or don’t care about it. Check out
the future of social security and you might start being concerned now. How easy is it to find a place that you could improve and live in it for a couple of years and sell it for a profit. It doesn’t
have to be $250,000, it could be $50,000. Take the profit and put it in the bank and get another
place and start over. Keep doing it until you feel you have enough in the bank.
Lastly, adopt the phrase: Two Years and Away We Go, and your future could be made secure in five to ten years. Really!!
Our nation is busy trying to choose two candidates who will campaign against each other to
see who America considers the best one to be the new President. Unfortunately it isn’t going
to matter because neither side in this election wants to discuss the ridiculous financial situation
we find our selves in now. We owe others $19 Trillion and by the time the new President is in office
it will be closer to $22 Trillion. The new figure will puts us at about $1 Trillion in interest every year!
Now before I move forward I know that everybody has heard almost every candidate talk about their
new tax plan that will balance our budget in 4 years, 6 years in a decade etc. By the time any of these plans are operating you will see that the time limit isn’t correct. Even if it was correct our
national debt will be at $30 Trillion plus, which will take decades to close out.
I bring this all up to suggest a new strategy for preparing your retirement successfully. When I was young and buying my first house it was considered my future bank. Once I had some equity I could always use it to clean up my financial shortfall. It worked most of the time but it has to be forgotten
now because you will need as much equity as you possibly can get to make it to, and then through
your entire retirement.
There are two things that will stop your retirement dreams that you need to know: not enough equity
in your house to get you through to the end, and the U.S. Government coming after your money to keep the nation afloat. Social Security will not be there for everyone and with more mismanagement
it won’t be there for anyone. So what is a person to do?
The current tax laws for selling your house are very fair and very helpful. If you have lived in your house for two years and want to sell it for a profit: (a.) if you are single you get the first $250,000
of profit tax free or (b.) if you are married you get the first $500,000 of profit tax free. That will go a
long way toward a comfortable retirement. If you have a house with enough equity for your age, and
you are over 62, you can get a reverse mortgage which gives you a stipend of money or pays off your
mortgage or both and you don’t have to pay it back.
You need to start now because it appears our leaders are going to be more of a hindrance
than a help. It is time to put the oars in the water and start moving away from the waterfalls just
around the bend. It is never to late and certainly never TOO EARLY to get your boat and crew
working together for your common good!! Here’s to a pleasant voyage and a successful landing.
-As a Senior Citizen in the mortgage industry I am on top of reverse mortgages because they are
a terrific help to millions of senior homeowners, yet more than half of the senior homeowners think they are the worst thing ever invented in the mortgage industry. I am going to enlighten you, far more than I usually do, because I am tired of hearing how bad the best thing I have seen is, and
how the seniors are being hurt financially, which they are not.
Before I get into the subject let me tell you what I have been told to my face about reverse mortgages. One senior lady told me her realtor told her that if she takes a reverse mortgage her
health insurance will go up in price. (I just shook my head from side to side), One prospective borrower told me that his wife said if we took a reverse we would be the most selfish parents in the world. (I am still shaking my head). One young man, son of my reverse borrower told me that I was stealing the equity out of his parents house that belonged to him. (I asked him why he hasn’t volunteered to pay their monthly house payment and then he wouldn’t have to worry. I
said they really can’t carry it alone. He just got up without saying anything and left the house).
When I first sit down with the prospective borrowers and their family I always start with the
title of an old song: Born Free! I state every time that it is very possible to have a child that is
born free, my oldest daughter is one example of it. But the room turns silent when I make my next pronouncement: I have yet to hear any song that references Dying Free. It doesn’t happen very often. When it does happen and you aren’t prepared, reality is hard to accept.
So lets take a look at this wonderful invention and show why I believe it is one of the best things
that ever happened to seniors. The following is a list of benefits to you which cost you nothing.
1. You borrow money on your house up to a certain limit (explanation to follow).
There are no payments on this loan until the last person on the loan leaves the
house permanently. You must pay your property tax and insurance.
2. You can sell the house or refinance out of the reverse mortgage at any time. It
is just a loan. The difference is no payments are required and the interest on the
loan accrues and is added to the balance.
3. The only requirement to get the loan is age: 62 for the primary borrower and the
secondary borrower (spouse) can now be younger than 62. You also must own
the property and have enough equity in it. You also must have social security or a
small amount of money in the bank to show you can pay your property tax.
4. The house can lose all its value for any reason and the loan continues. The house
can gain in value and the only thing that happens is when the occupant leaves for
good the occupant or heirs will get more money from the sale of the property.
5. If you live and own 2-4 units there are extra perks for you when you take out your
6. You can get a reverse mortgage if you have had a bankruptcy or a foreclosure
without waiting years.
7. You can get a lump sum of cash or a line of credit or both from the money coming
out of your house.
8. You NEVER lose ownership of the house because you took a reverse mortgage.
Take the pressure off and look into a reverse mortgage. It will change your life from
worrying about making the mortgage payment and waiting for the check to arrive monthly
or seeing the bank statement with a bigger balance than, in some cases, ever before.
In today’s economy owning a home appears to be the best way to live, create wealth and secure a good retirement. I rest my case with two or three reasons: tax write-off from the interest on your home loan and your property taxes, and the fact that most real estate increases in value because of demand, supply, inflation and government regulations.
The tax law on the sale of your owner occupied house that is currently in affect can help you create an estate that most Americans could only dream about a few decades ago.
I will explain my case so that nobody can say they didn’t know. The write-off of your mortgage interest that is part of your monthly payment (the other part being the principal pay down) and your property taxes are tax write-offs that lower your state and federal income taxes. Generally houses increase in value because of inflation which forces prices up for the materials that are used to build your house. This means that each year and each decade require a higher price to build a house and thus a higher price when you sell your house. The supply of homes usually diminishes by the neighborhoods that are more desirable forcing prices up as well. Even when we go through hard times, recessions, the prices of homes can drop but almost always the prices recover and the upward climb continues.
The best thing the government has done recently for homeowners is to allow a single homeowner who has lived in his or her owner occupied home for two years before they sell it. The single owner gets the first $250,000 in profit without being taxed by the Federal government. If you are married you receive a $500,000 exclusion from taxes on the sale of the house, again if you have lived in it for two years.
If you have 4 to 8 years with a mission you can become a millionaire by selling your houses every two years. If you are single you need to do this 4 times and pocket $250,000 each time from the profit. If you are married you need to only sell the house and put $500,000 in the bank each time. Now you have seen the bright side of the picture, but that usually doesn’t happen
Most people will have to be in their house for 5-10 years to get that much profit from the sale of
their house. So instead of 4 great sales for and individual and 2 for a couple it could easily be
double: 8 for a single person and 4 for a couple. It really totally depends on how driven you are. If you are a handy person who can do a lot of the fix up work yourself it will go quicker because you will be doing it and it won’t cost too much.
If I were a young man my future would depend on a steady job and most of my free time fixing
up my house so equation will work for me.
CAUTION: The Federal Government is in heavy debt and their generous tax plan for those
who are selling their owner occupied house could end at any time. They also could modify
it by extending the holding period of 2 years to maybe 4 years. They could also cut down the
amount of profit that doesn’t get taxed. If you are really anxious to do this