Change the Structure of Your Mortgage

Ride Your Wealth HorseA

verage Americans, like half of the working public, have less than $25,000 set aside in their retire-ment accounts. They spend more than they make. Furthermore, 46 percent of Americans say they

will have to postpone retirement due to a lack of funds and an astounding one-third say they have no money saved in any kind of retirement account! They are probably house rich, cash poor and worried about their lack of retirement or college savings. Every month after they pay their bills, they realize that there is nothing left over. They have been doing everything accord-ing to what the government, the mass media and television financial gurus are telling them, yet they still can’t seem to get ahead. A nice retirement is beginning to seem like a long shot. But you can beat the odds by creating your own wealth horse. by David Muti

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Curtis McNeillCurtis McNeillCurtis McNeillCurtis McNeill512-335-6601

The Extra Cash CrunchHow can hard-working homeowners find extra cash at the

end of each month so they can pay down their credit card debt or, more importantly, contribute to retirement and keep con-tributing over time? Many people have refinanced in the past, trying to “save” money by lowering their interest rate, think-ing that they would get ahead. Yet, they found themselves in the same mess because they went back to doing the same thing: they prioritized their monthly payments as most people do. First they paid their 30-Year fixed rate mortgage, next they paid their consumer debts (food, electricity, and general liv-ing expenses), and then, if there was anything left over, they “saved it for a rainy day.”

As you can see, the problem is that the first two items take up most Americans’ entire paycheck, leaving nothing for saving or investing. They end up paying themselves last and therefore they don’t get paid. The average American is running in circles because no one told them the secret to getting ahead and generating wealth: creating free cash flow and investing it for long term growth. That is why setting up automatic payroll deposits is the only sure way homeowners have to ensure they pay themselves first. It is the first step to actually building wealth.

So where does this “extra cash” come from? Most peo-ple are still in a 30-year fixed rate mortgage, or worse, a 15-year fixed. Some are even paying down principal faster than required by sending in extra payments. The problem with this is that the money they are putting towards paying down their mortgage balance is not earning a rate of return. In essence, it is dead money that they might as well bury in the yard or put under their mattress. House values will go up or down based upon market appreciation. It has nothing to do with how big of a mortgage you have or how much you put on a home. Worse, extra payments towards princi-

pal is money that is not working in other investments. By directing the principal portion of a mortgage to an invest-ment account that will earn a rate of return, even modest wage-earners can look forward to retirement.

A Winning StrategyImagine you were to enter a horse race. Wouldn’t it be nice

if you could enter two horses in that race? If you pay yourself first with the “principal” portion of your mortgage payment, you could invest it for long term goals such as retirement. You can take the same money you are currently spending each month with your mortgage but direct it to two places. This is how you effectively enter a second horse in the “wealth” race. You bet on a winning, conservative investment account. By simply changing the way you pay your mortgage you can cre-ate an additional $240,000 over 30 years without increasing your monthly payments by one cent.

In order to illustrate how this works, let’s suppose that you currently have a $300,000 mortgage that is a 30-year fixed rate at 6.625%. If you change the struc-ture of your mortgage to an interest-only at 6.25%, the old payment of $1,920.93 would become $1,562.5. That is a difference of $358.43 each month. Let’s take this a step further. You now invest this money in an account earning 7.5%. This would turn into $63,776 after 10 years, $198,475 after 20 years, and $482,968 after 30 years. Then if you still wanted to pay off your loan, you would have the ability to do this in the 25th year — a full five years ahead of the 30-year fixed rate schedule.

In Case of EmergencyIn addition, this investment account

could provide you with an emergency fund in the event of a layoff or disability, allowing you to pay your bills until you get back on your feet. This account would also be available to capitalize on opportu-nities that you would not otherwise have been able to pursue, or simply to help you through life’s bumps in the road. In the long run, how you use your double earn-ings is up to you. ■

Most People Pay Themselves Last!

RETIREMENT INVESTMENTACCOUNTS

0%

MORTGAGEPAYMENTS

50%

OTHER DEBT& LIVING EXPENSES

50%

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C E R T I F I E DMORTGAGEPLANNER

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Curtis McNeillCurtis McNeillCurtis McNeillCurtis McNeill

Certified MortgagePlanner

Blueprint MortgagePlanners1420 Cypress Creek200-191Cedar Park TX 78613

curtis@blueprintmtg.com

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