Mortgage Debt Elimination
Sit back for a second, close your eyes (well after you read the instructions), and visualize your life without a mortgage payment.
How would your life be different? What could you invest in with that money you were putting toward the mortgage?
Between 30-40 year loans, second mortgages, and home equity lines of credit it seems
that the mortgage monkey will always be on your back. But it doesn?t have to be!
While mortgage debt is one of the few debts it is hard to do without; beware mortgages cost you more than you think. Get out early!
If you have already decided you need mortgage debt elimination then proceed onto the debt freedom plan.
But if you need a little extra convincing as to why you should get rid of your home loan as soon as possible, read on.
When my husband and I first told my father-in-law and brother-in-law that we were going to pay off our house in a few years they said, ?What about the tax right off??
Good question. For every dollar you spend in interest toward your mortgage you deduct that amount from your income. Most people avoid mortgage debt elimination because they want the tax right off.
Let?s examine that for a minute. Let's say your mortgage is $1000/mo, or $12,000 a year. Let's also say that last year $10,000 went to interest. You can write off $10,000 from your income when you file taxes, that means you don?t pay taxes on that extra $10,000. If are in the 25% tax bracket you avoid paying $2,500 in taxes. Seems OK.
But if your house was paid off. You wouldn?t have paid the $10,000 in interest and you would have to pay the $2,500 in taxes. I don?t know about you but if I had to choose between paying $10,000 in interest or $2,500 in taxes. I would choose the $2,500 and pocket or invest $7,500.
In other words for every $1 you spend in interest you save $.25 in taxes.
Second mortgage companies over lend. Did you know they plan on having a certain amount of their mortgages default? When you apply for a mortgage, mortgage companies over lend, so that they can make more money from you in interest and cover the defaults. You feel the pinch in your pocket book. Or get frustrated because so much money goes to the house every month. Or both.
Then when you lose your job there is no way you can make that mortgage payment, you were barely making it before. It can be dangerous to keep all that debt out there with no safety net.
Mortgage debt elimination allows you to be in a better financial situation should a problem arise. Which at some point probably will.
Third, have you looked at your amortization scale? What this means is that for the first 7 years of your mortgage most of your payment is interest. Why is that? For one reason if you default the bank has most of their money already. They are not too concerned with how much equity you have in your home.
They are looking out for their own interests, you need to look out for yours.
The sooner you can pay down that principal the lower your interest amounts will be. This makes a huge difference in those first seven years.
Seven years is also a good number because on average you will buy a new home every 7 years, or get a second mortgage or a home equity line of credit.
So as soon as you start paying down the principal, you get a new loan and the amortization schedule starts again.
Mortgage debt elimination gets you ahead of the game and keeps all those interest dollars in your pocket to spend, save, or invest!
"A man in debt is so far a slave,"