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5 Why Pay It Off? ..............................................................................................................9 Interest Rates That Bankrupt “Average Joes”...............................................................11 .......................................................................................................................................11 21st Century Black Plague – The Mortgage Crisis........................................................12 ‘Easy’ Loan Consolidation............................................................................................14 ‘Easy’ Re-Financing .....................................................................................................16 Conclusion.........................................................................................................................18 Debt As A Way of Life..................................................................................................18 The ‘Miracle Cure’ For Unhealthy Mortgage Debt.......................................................19
If you’re a homeowner who wants to save thousands of dollars in mortgage payments and ‘bulletproof’ your financial well-being against uncertain economic times...then this report is for you! My name is Greg Andrews. I'm a certified financial planner, former banker, and an online entrepreneur and the inventor of the revolutionary Mortgage Phasing System. A system designed to help you pay off your mortgage in less time than you ever thought possible, and with less money. I’d like to congratulate you for downloading this free report. A lot of homeowners need the knowledge you’re about to gain. Without it, they could easily lose their homes...or spend the rest of their lives making interest payments on a debt that never seems to get paid-off. Confused? You’re Not The Only One I know myself that mortgages can be a very confusing topic. There is a mountain of myths and misconceptions that can fool anyone into making bad financial decisions when it comes to home financing. I was fooled…..But I learned long ago that the myths were keeping me locked into a mortgage that was costing me a small fortune and letting money pour through my fingers and into someone else’s bank account. I want to prevent you from making the mistakes I made. You worked hard to buy your house and …..
…..The lies and half-truths you may have heard about your mortgage loan are robbing you blind!
If you have a mortgage that's costing you an "arm and a leg" in repayments, you're not alone there, either. Mortgage debt has spiraled into trillions of dollars and mortgage repayments absorb a staggering 42% of an average American’s take-home pay. And for what?! Usually, the total amount of interest and principal paid over the life of your loan is about three times the size of your mortgage. Only 1/3 of the money you pay to the lender is actually what you borrowed. The rest is interest. So, for example, if you have a 30-year
fixed loan for $100,000, over 30 years, you would pay approximately $300,000 to your lender. That huge sum of money in interest is going to someone else. Why? It could be working for you and building to your financial well-being instead of your banker’s. Let me ask you a simple question:
Do you really want to work three decades to give your lender such a large chunk of your hard-earned money?
Americans Move and Debt Stays Put In America, the average person moves every 7 years. And when most people move into a new house, they get a new mortgage and go right back to payments where 90% of the amount is going towards interest. If you are average, you'll probably never pay off a house in your lifetime unless you become aware of how money works. And one of these days, it may be too late. Think of it like this. If you have a 30-year fixed, $100,000 mortgage at 7% interest and you move after 5 years, you will still owe 94% of your original loan or $94,000. Of the thousands of dollars you have paid over 5 years, you will only have reduced the principal by $6,000 because most of your payment for the first 5 years goes towards interest. After 10 years...120 months of payments... you'd still owe about 86% of your mortgage balance. The dirty, costly secret is...
It takes literally 20-25 years of mortgage payments just to reach 50% in equity
Understanding The Value of Equity
Home equity is the amount of money you have already paid against the value of your home. In other words, your equity increases as your mortgage balance decreases. If your home has been appraised for $200,000.00 and you owe $125,000.00 on your mortgage, your equity is $75,000.00. Many people put their established equity to work for them. They borrow against it and use the money for improvements to the home, for college tuition for their children, or for things like investments in business ventures such as purchasing additional property. A simple formula for determining your home equity is to subtract the amount of the mortgage balance from the current fair market value of your home. Gimme Shelter Perhaps you’re someone who is not prepaying a mortgage because it is your last tax shelter. Again...you’re not alone. But let’s think things through here. You are paying a dollar of interest to get back 28 cents in tax deductions (or whatever your tax rate is). This is called "negative cash flow." Another reason I hear for hanging onto a mortgage is that people would rather use the money to invest and get a greater return. First of all, this is not an apples-to-apples comparison. One is a guaranteed rate of return; the other is not. There's no guarantee with other investments. Yes, you may come out ahead in some investments--but you may not. If your money were in the stock market right now, paying off your mortgage would almost certainly have given you a greater return.
The Best Return on Your Mortgage Investment
There is another school of thought that says don't pay off your mortgage early. Use that money for investing. At today's interest rates, you're getting very cheap money. It's not likely we'll see interest rates this low again for quite some time. You have the unusual ability to take advantage of these historically low rates. If you can earn more than your mortgage interest rate as an investment return, this school of thought says you should do so, and invest the money you would have prepaid on your mortgage. This will allow you to take advantage of the time tested principle of leverage to increase your net wealth. Because leverage is such a powerful tool, you can generate substantial wealth using it to build your retirement. Having a few hundred thousand dollars to invest is a sure way to get a head start on your retirement nest egg. Leveraging money is freedom. It propels you into exponential wealth through your ability to leverage the money you have right now, which even though may not seem to have great potential, can bring you incredible freedom and true security if you can get around the debt. People don't understand that average incomes are easily leveraged into over a million dollars by the time your mortgage normally would have just been getting paid off. BUT...you must be able to get an investment return that exceeds your mortgage interest rate for this to be a smart move. While leveraging your home mortgage into a retirement nest egg can be a wise choice for some, it ignores the value of being debt-free. Being debt-free obviously has an effect on your monthly cash flow and your psyche. Most people experience a dramatically increased sense of well being and security by eliminating all their debt. Diversification Every investment book I’ve read says that a smart investor diversifies his portfolio, putting some of his money into each of several different types of investments. I view prepaying the mortgage as diversification. Sure, the stock market will probably beat the 6.25% I’ll earn by doing this, but it’s guaranteed money. To me, it’s better to put my money into my mortgage than into bonds or a high-yield savings account...especially if a recession comes along.
Your Biggest Enemy: Complacency
Do you know who the biggest enemy to your financial well-being may be? It's….You! If you take a ‘things will all turn out fine in the end’ attitude, you may find yourself deeply in debt, without any home equity to speak of...at the mercy of bank foreclosures or real estate hawks ready to swoop in and cash-in on your financial distress. You can’t afford to do nothing. And there's no time like the present to begin your quest to pay off that mortgage. Want some motivation? Start by reading the amortization schedule in your mortgage. Once you see exactly how much of your monthly payment goes to interest, and what a tiny portion goes toward paying off the principal, you will realize that every extra dollar you send reduces the portion of your payments that services your interest expense. That’s like a pitchfork in the behind for getting financially savvy individuals up out of their chairs! If you focus your efforts on the task at hand, you may be surprised at how quickly you can retire a mortgage. With your mission accomplished, you will find that the comforts of home are even more pleasurable when it is you - not the bank - who owns the home. Only you can decide if it is better for you to prepay your mortgage. Do you want to retire that debt early and save the interest? Or, is more advantageous to keep your mortgage and invest the money and/or retire other debt? A case can certainly be made for both approaches. Reading this report will show you the ugly truth behind several popularly held mortgage beliefs. And just as importantly, it will introduce you to a system that’s been helping homeowners get out from under the thumb of the mortgage lenders faster and own their homes sooner. It’s the smartest thing to do if you want to save thousands of dollars in interest payments and laugh all the way to the bank even when other property owners are struggling to hold on to their homes.
This report was designed to give you the facts you need to make an informed decision for Y-O-U...to pay off your mortgage and become debt-free in record time, or to hold on to your mortgage and continue on a traditional course of a 30-year payment plan. I admit that I’m prejudiced. I saved $154,407 in interest by paying off my mortgage early. But more than that, I built $38,927 worth of equity in my home in just 3 short years. To put it mildly...I think it’s crazy to move towards equity at a snail’s pace when interest rates are always moving at a gallop. I know personally just how good it feels to be debt-free. And let me tell you, it feels great! It feels even better knowing that I’ve kept more cash in my pocket and put less of my hard-earned money into the hands of the money lenders. When it comes to mortgage interest, every day counts...literally! So please read this report now. Right now. It won’t take long. I’ve done my best to present the facts you need without a lot of fluff and filler than you. When you’re done, if you agree that your current plan to repay your mortgage is taking more money out of your pocket than it needs to, I urge you to take control of your future by acting today. And if you believe that the system that’s described in the last chapter is the mortgage ‘miracle cure’ you’ve been praying for, then it’s important that you commit to take action immediately so that I can help you save tens of thousands of dollars and cut years off the length of your mortgage. That’s the good news. But first...
One of the biggest financial decisions people will make in their lifetime is the choice to buy a home. If you’re a multi-millionaire who can pay cash for your purchase, let me offer you my congratulations. You can plunk your money down and never have to worry about interest rates, loan options, balloon payments, or anything else to do with mortgages. For the rest of us, however, a mortgage loan is part-and-parcel of home ownership. Despite the tremendous financial burden of a mortgage loan, it is far better to buy than rent, of course. Home ownership allows you to build equity in your property. Rental money just goes into the pockets of landlords. When you pay off your mortgage, the cash value of your home (which is likely to have appreciated) is all yours. While it’s true that mortgage loan interest provides the single biggest tax break available to most taxpayers, it is far better to pay off your loan and invest the money you save than to continue to be victimized by uncertain interest rates and changing tax policies. But that’s not what the banks and mortgage brokers tell you. Don’t listen to them! The sooner you pay off your mortgage, the sooner your financial picture can really change for the better.
Why Pay It Off?
The first and most obvious reason to pay off your mortgage as soon as possible is that it will save you tens, and even hundreds of thousands of dollars. Read the papers you signed when you bought your home. It’s no secret that mortgage companies disclose right up front that you will pay more than twice the purchase price of the home before you actually own it. Take a close look at the sample figures below.
Using The Mortgage BI-WEEKLY Mortgage Standard MONTHLY Phasing System Payment Mortgage Payment
Mortgage Paid Off In Interest Saved Interest Paid Total Paid Equity built after 3 years
11 Years $154,407 $75,782 $240,782 $38,927
24 years $58,658 $171,531 $336,531 $9,198
30 years NIL $230,189 $395,189 $5,318
The second reason to get out from under a mortgage loan is the peace of mind you gain from owning your home. When you lower your monthly cash outlay, the prospect of unemployment or underemployment is no longer so daunting. You can now afford to take a job that pays a whole lot (and with a whole lot less stress) less than your previous position without any concerns about losing your home. What “They” Want You To Believe Mortgage loan professionals argue that paying off your mortgage is a bad financial move. They claim that you will get a higher return in the long run if you invest your money instead of making extra mortgage payments. While there is some chance that you will achieve such a feat, there's also a chance that you won't.
Given the choice between a guaranteed savings of the 6% interest on their mortgage (compounded for 30 years), or the possibility of achieving some other rate of return (which may be higher or lower), conservative investors will take the safe bet. So why do “they’ recommend long-term mortgages. Because it’s good for profits...theirs, not yours. The mortgage industry’s entire argument is moot when you truly look at the facts of the situation. Most people buy a home so they have a place in which to live. Even if it doubles or triples in value, they aren't going to sell it, and if they do, it will take every cent they earn to buy a comparable home in the same neighborhood. Besides, since you can't live in a mutual fund, most home shoppers don't make their purchase in an effort to beat the return of the S&P 500. The next argument against paying off your mortgage is even more dubious, but you hear it all the time - even from sophisticated investors. "Mortgage interest provides a tax break!" Yes, it does. You spend $1 in interest to get a $0.35 tax break - if you are in the highest income tax bracket. It's not a good return on your investment. Paying off your mortgage provides a return on your investment that is much more reliable than anything the stock market can offer. It also saves you tens (and sometimes hundreds) of thousands of dollars. To top it all off, it provides the security of having an affordable place to live in the event that your income declines. Sound good? That’s what I thought when I started to learn the facts about mortgages. And that’s why I’m so happy to have discovered the brilliant strategy at the heart of the Mortgage Phasing System. It allowed me to pay off my mortgage in record time without a lot of paperwork...or any work, really. But more about that a little later. (I just wanted to whet your appetite for financial freedom!)
Interest Rates That Bankrupt “Average Joes”
Interest. It's great when you get it, not so great when you have to pay it. And you’ll have to pay it for a long, long time if you’re carrying a traditional 30-year mortgage. For example, if you have a $250,000 mortgage at 6%, you'll spend over $260,000 in mortgage interest alone over the life of the loan, assuming you put 10% down initially. Granted, because of the mortgage interest tax deduction, the typical taxpayer may actually pay less. If you assume a 28% marginal tax rate, you'll actually pay about $185,000 in interest instead of $260,000. But tax rates and interest rates can change, and they do. The results can be financially disastrous. Take the $250,000 adjustable rate mortgage example discussed above with the 6% interest rate. What if the rate changes to 8% or 9%? A relative modest interest increase from 6% to 8.75%, will cost you over $400,000 in interest! The enormous savings that are possible with a lower interest rate are the reason so many borrowers have been clamoring to refinance over the last few years. But refinancing and debt consolidation are unreliable solutions at best…and financial suicide at worst, for homeowners. They do nothing to protect you against skyrocketing interest and economic downturns. All you need to do is look at the current mortgage crisis to understand what I’m saying.
21st Century Black Plague – The Mortgage Crisis
The mortgage crisis has taken its toll on the American Dream...spreading ‘death’ from city to city in the form of foreclosures. Sub-prime horror stories have been making headlines for much of the past year as falling home prices, a pullback in housing demand, overbuilding, interest rate resets, growing defaults and tightening lending standards played havoc in the residential market. By the end of 2008, 15-20 million Americans are expected be carrying mortgages worth more than the value of their homes. This is referred to as ‘negative equity.’ When you have negative equity and your home value is dropping, foreclosure may not be far behind. This is exactly what’s happening in America today. For the first time since the Federal Reserve started tracking the data in 1945, the amount of debt tied up in American homes exceeds the equity homeowners have built. The Fed reported in March that homeowner equity actually slipped below 50% in the second quarter of last year. And the housing industry's woes only seem to be getting worse. The Mortgage Bankers Association said foreclosures hit an all-time high in the final quarter of 2007. Experts believe foreclosures will rise as more homeowners struggle with monthly payments as the interest rates on their mortgages adjust higher. Problems in the credit markets and eroding home values are making it harder for people to refinance their way out of unmanageable loans. The sub-prime crisis has destroyed the equity people have had in their homes almost overnight. The Story of Two Homeowners Two brothers – we’ll call them Alex and Sasha – bought homes ten years ago. Each brother financed 100% of the purchase price with a 30-year, $200,000 mortgage at a 7% rate. Immigrants who had come to the U.S. from Russia, the men were proud of what they’d accomplished and certain that they were ‘set for life’ with dream houses they and their families would enjoy for a lifetime. Alex, the older of the two, worked hard to make payments to satisfy his mortgage the 'normal' way, with most of his money going towards interest and very little going towards paying down the principle. After a decade of paying and paying and paying, Alex had 12
built up only $29,000 of equity built up in his home. He felt good about things until the word ‘recession’ started being whispered and home prices dropped 15%. The value of Alex’s house has dropped a stunning $30,000 and the equity he had worked so carefully to build up was wiped out entirely in the blink of an eye. Alex ultimately went into bankruptcy and lost his home to foreclsoure. Fortunately he was able to move in with Sasha. Why was Sasha still a homeowner? After all, he had started out doing everything exactly like his brother. However, Sasha took a different (smart) approach to his 30-year mortgage loan. He utilized a system for fast mortgage repayment that you’ll be introduced to at this end of this report. Sasha’s hard work paid off handsomely with four and a half times as much equity in his home as his brother had achieved over the same ten year period. Instead of a mere $29,000 in equity, Sasha had built up $131,000! Sasha’s home value was still affected by the mortgage crisis, of course, but the impact on the younger brother’s financial well-being was far less than on Alex’s. Alex’s story is not unique, of course. Millions of people have watched their carefully constructed plans for the future go up in smoke, along with thousands of dollars of interest payments. But the good news is that more and more people are doing what Sasha did.
The Hard Truth About “Easy” Mortgage Solutions
‘Easy’ Loan Consolidation
If you've watched TV or opened your mail lately, you know that there are plenty of companies eager to help you consolidate your loans to (as they scream on latenight TV), “cut your payments in half, lower your interest rates, and "help you get out of debt fast, fast, fast!” Indeed consolidating your high interest mortgage loan and credit card debt into a single loan with a lower interest rate and more manageable payments makes perfect sense...in theory. Unfortunately, it doesn't always work out that way in practice. Many people who consolidate their loans end up paying far more than they would have otherwise and, in the case of home equity loans, an alarming number of borrowers end up losing their homes. Add to this the fact that many so-called "consolidation" programs aren't really consolidation loans at all, and debt consolidation, rightfully, has a bad reputation. Still, you may be able to benefit from consolidation if you explore your options and proceed with caution. The ‘secret’ is that a consolidation loan is still a loan...a debt. It is simply a loan that pays off your other loans. Once you consolidate a loan, you owe that money to the new lender, not to the original creditor. A consolidation loan may lower your monthly payments, either by reducing your interest rate or by extending the length of time for repayment, but it pays off the other creditors completely. It’s important that homeowners understand the difference between a consolidation loan, a debt management program, and debt negotiation. Companies that claim to be able to help you lower your payments or get out of debt quickly may appear to be offering consolidation loans--they may even have the word "consolidation" in their names--when in fact they use methods such as debt management, settlement, or even bankruptcy. There are major differences between these options.
Furthermore, consolidation loans may temporarily blemish your credit, although to nowhere near the extent of debt management programs or debt negotiations. One of the most attractive features of consolidation loans is the potential for lower monthly payments. But if the reduced payment is just the result of spreading your repayment over a longer period of time, you'll most likely be paying more--sometimes far more--with the consolidation than you would have otherwise Don’t worry. There is a better way. You’ll learn about it in a few moments.
Re-financing sounds so easy. You just find a lender who offers a better interest rate than you’re currently paying, so you have more money in your pocket each month and save more in the long-term. Right? Wrong! Refinancing can just dig up deeper into debt. There are three bits of information about any mortgage loan – particularly those offered by refinancing companies - that are very important: • • • Amount Financed: The amount of credit provided to you. This will normally be the amount of the loan you will receive from the lender. Finance Charge: The dollar amount the loan will cost you. This is the interest you will pay on the loan. Total Payments: The total amount you will have paid after you have made all payments as scheduled.
Unfortunately, many re-financing companies charge excessive interest rates for even the smallest of loans. Other ‘secrets’ that suck money out of your pocket include: • • • • • • • • Application fee Credit Evaluation Loan Processing (these fees can be pretty arbitrary) Appraisal Fee (cost to estimate the value of your home) Documentation (these fees can be pretty arbitrary) Underwriting (these fees can be pretty arbitrary) Escrow Fee Prepayment Penalty (the fee paid if you pay off your loan early)
The following fees are almost always ‘junk’ fees that signal a shady refinance: • • • • • • • • • Amortization schedule fee Trustee fee Financing statement fee Appraisal review fee Credit report review fee Document preparation fee Inspection fee Photo inspection fee Underwriting fee 16
• • • • •
Warehousing fee Administrative fee Computer fee Courier fee Exceptionally high notary fees
Just about the only ‘fee’ missing from this list of junk, is a fee for preparing the fee! It's definitely "buyer beware.” In my opinion, you should never ask a mortgage broker if it is a good time to refinance your mortgage… for them, it’s always a good time. They keep you focused on the amount that you’ll save monthly and fail to mention how much principal you owe and how long you’ll owe it.
There you have it. A laundry list of the half-lies and flat out fallacies that are swirling around the mortgage industry. The bottom line is that a mortgage is a loan with interest, and as it says in the Bible, “The rich rule over the poor and,,, The borrower is slave of the lender (Proverbs 22:7) Free yourself! As a homeowner, understand that when the principle on a mortgage loan is larger than the value of the house, the risk of foreclosure is larger, too. It’s also important to remember that home price appreciation should not be relied upon to eclipse the risks of mortgage debt. In other words, don’t count on a rise in the value of property to save you. (Just ask Donald Trump!) In a nutshell: Paying down mortgage debt reduces risk and can be to your economic advantage.
Debt As A Way of Life
According to a recent USA Today article about debt, 78% of Baby Boomers have mortgage debt. And given the state of those mortgages, most are likely to remain in debt for the rest of their lives. It remains to be seen how many of them will stay in their houses for the rest of their lives and how many will be forced into foreclosure because they were slow in achieving equity in their homes. Baby boomers and almost every first-time home buyer is stunned by how little of their monthly mortgage payments goes toward reducing principal. A $200,000 loan at 6.75% compounded semiannually over a 20-year term would involve a monthly mortgage payment of $1,510 per month, of which only $400 (of the first payment) would go toward principal repayment. The remainder, $1,110 per month, would be interest. As interest steadily eats away at your cashflow, and your equity barely budges.
Even after 20 long years of payments, you’ll only have achieved about 50% equity in your home and will still be deeply in debt. Our biggest debt is our mortgage, so it makes sense to repay this as soon as we can. There are the traditional methods of paying extra more frequently, paying a lump sum or using an accelerator program, such as bi-weekly. These will all help, but they each require extra cash out of our monthly budget...and for most homeowners that’s just not an option. Perhaps you’d like to pay off your mortgage sooner, but are convinced that it’s not possible for ‘someone like you.’ It is possible! You can pay off your mortgage and be debt-free sooner. No matter your income or expenses, it can be achievable for you. Your can start your debt-free plan today with a commitment to pay down your mortgage faster and build YOUR future wealth, not someone else's. You can do it, and I’d like to help you. That’s why I want to introduce you to Mortgage Phasing.
The ‘Miracle Cure’ For Unhealthy Mortgage Debt
With Mortgage Phasing, you can get the deed to your home so much faster than before without changing your contract, lender or doing anything of the sort. Plus this technique is incredibly easy to apply. It’s like the miracle of compound interest with a unique twist. When you take a look inside your copy of the Mortgage Phasing System you’ll have the comprehensive system that I used myself to pay off my mortgage. It’s the entire system from start to finish that’ll let you attain ownership of your home in as little as 10 years (or much less) and potentially save you tens, and even hundreds of thousands of dollars in interest. By the way, there’s absolutely no paperwork involved. That’s because you can keep your current mortgage exactly as is with the same provider. Saving money truly couldn’t be easier. Better still you don’t have to do anything to increase your income nor do you need another job. All you need at most is a small amount of surplus cash. (Sorry, this system isn’t recommended for people who are barely able to keep their head above water) 19
The Mortgage Phasing System is a perfectly legal process that has been used by the financially savvy for quite some time. It does NOT involve refinancing whatsoever. And it can all be made completely and utterly effortless. Literally… you’ll hardly have to lift a finger.
The fact of the matter is, that this is the most effective and efficient way you can use your money.
It just flat out works. I’ll Make It Easy...and Safe Unlike interest rates, your success and satisfaction with the Mortgage Phasing System is guaranteed. I’m so confident you’ll absolutely love the 'Mortgage Phasing System' that I’m giving you not 30 days, not 60 days, but 180 days to test-drive this system. What could be fairer? And listen to this: When you order your copy of the Mortgage Phasing System , you’ll also receive a FREE bonus package worth $204.00. This system is available exclusively through my website at:… >> http://www.bemortgagefreesooner.com I hope you have found this report helpful. And if there’s someone that you think deserves to know The Truth About Your Mortgage...I hope you’ll share this with them, too. Best wishes for a long life and a short mortgage,