People invest in all manner of things because they want to get ahead.
Perhaps you want a more lavish lifestyle, or just simply want to take care of your family and prepare for retirement.
(Don't forget your retirement years can last longer than your working years!) Here's my question: are you investing in the right things? Throughout the year, the media has profiled prominent real estate investment companies that have gotten themselves into trouble, schemes that have bilked investors of millions and once giant corporations that have simply gone "belly up.
" It seems like an investment minefield out there.
Don't get me wrong, I'm not against investing and I'm certainly not suggesting that all investments are bad.
My point is this-given the current market instability, when we're investing, perhaps we should look at what we already own, such as a home.
I'll let you in on a little secret.
I advise my clients to invest in their homes first-before they invest in other people, companies or ideas.
It's certainly not a suggestion you will hear too often from others in the financial world, but it does save my clients tens of thousands of dollars that they are then free to invest elsewhere.
Consider the following: let's say you've just spent $350,000 on a home.
For simplicity's sake, we'll say that your interest rate is 5% for the full 25-year amortization period.
(Amortization is the period of time it takes to pay off the entire loan, including the accrued interest.
) Roughly, this comes to $2,036/month.
I know what you're thinking-this is a manageable payment and you've just gotten a nice home out of it, right? Although this is certainly true, did you know that after 25 years, you will actually have paid over $610,000 (principal plus interest) for the privilege of borrowing that $350,000! Remember, the marketing today around mortgages is strategic and generally emphasizes your monthly payment, not how much it will cost you in the long run.
Paying off Your Mortgage Faster Here's what I recommend: Step #1 - Make bi-weekly payments instead of monthly payments.
Based on the above scenario, this one step will save you approximately $43,500 in interest alone and lower your amortization period from 25 years to 21 years and 4 months.
By simply increasing your payment frequency, you will save $43,500! Fantastic! Step #2 - Make extra payments.
Let's say you invest an extra $1,200 per year in your mortgage.
(That's only $100 per month.
You see, marketing really does work!) Assuming you've already implemented step #1, step #2 will save you a further $19,000 and reduce your amortization period to 19 years and 10 months.
By implementing these two simple steps, you will now pay $548,000 (instead of $610,000) to borrow $350K-a savings of $62,000! In summary Purchasing real estate is a great investment.
If you look after it, it should provide you with a 4-6% return per year.
It's an investment that will make you money in the long run and it's an investment that YOU, as the owner, have control of.
By applying the simple strategies mentioned above, you can dramatically improve this important investment.
You will not just be able to pay your mortgage off faster, you will also reap the significant financial and emotional benefits that come with having more money in your pocket.
Perhaps you want a more lavish lifestyle, or just simply want to take care of your family and prepare for retirement.
(Don't forget your retirement years can last longer than your working years!) Here's my question: are you investing in the right things? Throughout the year, the media has profiled prominent real estate investment companies that have gotten themselves into trouble, schemes that have bilked investors of millions and once giant corporations that have simply gone "belly up.
" It seems like an investment minefield out there.
Don't get me wrong, I'm not against investing and I'm certainly not suggesting that all investments are bad.
My point is this-given the current market instability, when we're investing, perhaps we should look at what we already own, such as a home.
I'll let you in on a little secret.
I advise my clients to invest in their homes first-before they invest in other people, companies or ideas.
It's certainly not a suggestion you will hear too often from others in the financial world, but it does save my clients tens of thousands of dollars that they are then free to invest elsewhere.
Consider the following: let's say you've just spent $350,000 on a home.
For simplicity's sake, we'll say that your interest rate is 5% for the full 25-year amortization period.
(Amortization is the period of time it takes to pay off the entire loan, including the accrued interest.
) Roughly, this comes to $2,036/month.
I know what you're thinking-this is a manageable payment and you've just gotten a nice home out of it, right? Although this is certainly true, did you know that after 25 years, you will actually have paid over $610,000 (principal plus interest) for the privilege of borrowing that $350,000! Remember, the marketing today around mortgages is strategic and generally emphasizes your monthly payment, not how much it will cost you in the long run.
Paying off Your Mortgage Faster Here's what I recommend: Step #1 - Make bi-weekly payments instead of monthly payments.
Based on the above scenario, this one step will save you approximately $43,500 in interest alone and lower your amortization period from 25 years to 21 years and 4 months.
By simply increasing your payment frequency, you will save $43,500! Fantastic! Step #2 - Make extra payments.
Let's say you invest an extra $1,200 per year in your mortgage.
(That's only $100 per month.
You see, marketing really does work!) Assuming you've already implemented step #1, step #2 will save you a further $19,000 and reduce your amortization period to 19 years and 10 months.
By implementing these two simple steps, you will now pay $548,000 (instead of $610,000) to borrow $350K-a savings of $62,000! In summary Purchasing real estate is a great investment.
If you look after it, it should provide you with a 4-6% return per year.
It's an investment that will make you money in the long run and it's an investment that YOU, as the owner, have control of.
By applying the simple strategies mentioned above, you can dramatically improve this important investment.
You will not just be able to pay your mortgage off faster, you will also reap the significant financial and emotional benefits that come with having more money in your pocket.