What The Experts Say
Read what the Experts are saying about the Wealth building strategies that Chris Winters practices to safely and conservatively create wealth for his clients.
Why Your Home Is Not the Investment You Think It Is
"It's risky and bad planning to have too much of your net worth in your principal residence. No prudent stock-market player would put 60% or 70% of a portfolio in just one stock, but millions will hold that much or more of their total net worth in just one hours." Wall Street Journal Online - March 15th, 2007
Pay Off The House? Not So Fast...It may be smarter to invest the extra money instead of eliminating your mortgage.
If you ask yourself whether you should pay off the mortgage before you retire, your first impulse may be to say: "Why not?" Many people have an instinctive desire to own the house free and clear before they stop working, figuring the absence of a monthly mortgage payment will help relieve the pressure of living on a reduced income. ...But prepaying your mortgage may not be the savviest move, particularly from a tax standpoint. This is especially true when faced with the choice between fully funding a tax deferred 401(k) or adding to your mortgage payment each month. It even applies when the alternative is to invest more in a taxable account. Business Week - February 5th, 2007
Using data from the Survey of Consumer Finances, we show that about 38% of U.S. households that are accelerating their mortgage payments instead of saving in tax-deferred accounts are making the wrong choice...In the aggregated, these mis-allocated savings are costing U.S. house-holds as much as 1.5 billion dollars per year. The tradeoff between Mortgage PrePayments and Tax-Deferred Retirement Savings - Federal Reserve Bank of Chicago - White Paper: 05-2006.
FORBES Investment Guide - Hock Your House.
"Some advisors say payoff your mortgage. We say leverage up and invest." FORBES-DECEMBER, 13TH 2004
The Equity in Your Home is a big disadvantage!
"By having cash available for emergencies and investment opportunities, most homeowners are better off than if their equity is tied up in their residence. While employed and in excellent health, borrowing on a home is easy, but most people, especially retirees, unrepentantly need cash when they are sick, unemployed or have insufficient income. Obtaining a home loan, under these circumstances can be either impossible or very expensive." CHICAGO TRIBUNE
"Carrying a mortgage doesn't cause you to lose money at all, just the opposite is true. Carrying a mortgage is actually quite profitable. It's eliminating the mortgage that forces you to give up profitable opportunities." - Ric Edleman - Ordinary People, Extraordinary Wealth.
| “Planners must consider many factors when analyzing the 15-year versus 30-year mortgage option, but certain issues deserve mention. First, even if the mortgage is held to maturity, the argument that the 15-year option is optimal because fewer total dollars are spent to purchase the home is seriously flawed. The fact that a smaller total dollar expenditure is required for the 15-year loan is irrelevant to the maturity decision.” |
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| The popular press, following conventional wisdom, frequently advises that eliminating mortgage debt is a desirable goal. We show that this advice is often wrong…mortgage debt is valuable to many individuals. |
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“…home owners…may not be adequately considering the opportunity costs of the investment in their home. Individuals should not attempt to analyze the mortgage decision in isolation from their overall personal financial plan. Instead they should consider the mortgage decision along with their plans for long-term investing, insurance needs, tax planning and so forth. If the only way home buyers can afford the higher 15-year mortgage payment is by delaying long-term investments or by limiting the funds they commit to a long-term investment plan, they may be better off in the long run by taking the 30-year mortgage with the lower payment and investing the difference…. “….the 30-year mortgage is clearly the best financial choice for many home buyers.” |
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