For this and all of the following examples, we are going to use the scenario presented by UFF (United First Financial) in the presentations they offer to clients. I am glad to see that some of the errors from previous presentations and some of their agents have been corrected, so we can go with what they show now.
Here are the details:
|Interest Rate (30 Yr Fixed)||6.000%|
|Discretionary Income||$1,000 (Income-Expenses)|
|Investment Rate of Return||6.000% (Conservative)|
|Borrower’s Tax Rate||25% (likely more)|
So, let’s look at the homeowner’s first option. Quite simply to do what most Americans do, nothing but pay their monthly mortgage payment and typically squander the rest. End result is that it takes 30 years to become financially free.
Option 2 is a little better. They take all of their discretionary income and place it into their mortgage, paying it down as quickly as possible, or so they think. The end result here is they have their home paid off in 12.83 years. The probably is this leaves them with no money in the bank in the process.
Option 3 is still better. Now they decide not to place their money into their home, but rather build on their investments instead. Amazingly enough, they will be in a position to pay off their mortgage even earlier, at 10.17 years. The big difference in this option is the increased liquidity, safety and rate of return, as well as options, they can take advantage of.
Option 4, they decide to go with a Money Merge Account instead, because they want to focus on paying off their mortgage as fast as possible. The end result (according to the presentation) is that their home is paid off in 10.4 years. Certainly better than simply applying the extra income each month into their mortgage and they get a HELOC to boot. United First Financial says the payoff time is conservative and the real payoff could be sooner, so let’s give them a 15% discount. Now that payoff is at 8.84 years. Pretty good, right?
Option 5 is to use a the CMG Home Ownership Accelerator. For this scenario, we will use it like CMG wants you to, refinancing the entire first loan into the new HELOC. The end result is that the home is paid off in 11.2 years.
Option 6 is a little different thinking. Here is where they elect to use an interest only loan instead, saving an additional $199 in monthly payments. So now they invest that extra money as well. The end result is about the same as Option 3, 10.17 years with similar benefits.
Option 7 starts requires even more of a different mindset. Now the homeowner decides to get the interest only loan and invest the extra $199 plus the tax savings accrued. The end result is the homeowner is in a position to pay off their mortgage in just 8.83 years! The fastest, even when throwing in some time off for the MMA. What is amazing is you could achieve even greater rates of return and shorten the time frame even more.
In the coming posts, I will begin to break down each option. The point of these posts is to educate you on your options and help you decide which one may be of best use to you. Again, don’t take my word for it, seek other fully qualified mortgage professionals who fully understand all strategies.
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