Paying “Extra” On Your Loan – Mortgage Rigormortis!
Beware… This could be your biggest financial mistake!
Accelerated Loss of Your Tax Deduction
Perhaps the idea of never paying off your mortgage goes against the grain of your upbringing or your common sense. The historical roots of our society’s motivation and determination to pay off our mortgages actually stems from the Great Depression. Massive foreclosures occurred when people lost their jobs and couldn’t make their payments. The natural response in managing family finances in the aftermath was the initiative to be debt free. A similar occurrence developed in the years following the financial crisis of 2008. The reality of these lessons learned from shockwaves in our economy is a lesson in personal financial management. One of the simple concepts we discuss in this book is the establishment of an emergency fund. Yes, to survive the economy’s “shock treatment” may take a large emergency fund for some, but that’s the point.
Loss of Your Liquidity
What is “Cheap Debt?”
The Realities of Retirement Can Be Negatively Affected By Paying Extra on Your Mortgage
Establish an Emergency Fund. Have three to six months of income stashed in a savings account in case of ill-health, job loss, or disaster. We understand that it seems like a lot, but it’s an essential part of a fundamentally sound plan.
Use time and consistency as your mantra for retirement savings. Substantial wealth can be accumulated over time with consistency in your investment habits. Start early and invest every month. It’s not a matter of where you invest, it’s that you make a habit—a discipline—of investing. You need to make a commitment to regular, monthly, investing. It’s not difficult. We can show you how. That’s how you win over time!
Take advantage of the benefits of home ownership. There are many! (See the previous chapter, The Rational Renter vs. The Bold Buyer for more details.)
A Case Study
Actually INCREASE the tax deduction (due to new amortization)
Maintain exceptional liquidity.
Dramatically lower her payments
Increase her portfolio through additional return on investment