Financial Planning and Interest Only Mortgages
As you get older you do become more careful in your investments, with your time and your money. Interest only mortgages are one of those options, that if you’re investing in real estate for the short term, and you’ve consulted with a reputable financial advisor, you might want to consider. Investment portfolios do not normally include real estate, so more than likely this is a business venture or an investment business. In either circumstance, financial planning is a must. This is one of those options, that should however, be considered only after careful planning and thought. The trade off, may be or may not be to your advantage.
Long-term investments, those with capital gains, and purposes other than a quick profit, I don’t think are candidates for the interest only mortgage. The interest only mortgage doesn’t present much in the way of building and increasing investment value, because you simply never increase the value of the asset to you. You increase the value of the loan for the lending institution, because you are continually providing a profitable situation for the lender. Your principal investment responsibility never decreases.
What about the short-term implications and your financial preparation? Well, this leaves many doors unopened and many avenues unexplored. However, given the fact that you’re considering the end result of the interest only mortgage product on your financial planning expectations, there aren’t very many “short-term” considerations open for discussion. The only short-term benefit to interest only is that your monthly payment is frequently very low during the term of the interest only payment.
When you analyze the impact your 401(k), an MSA, an IRA, or any other tax deferred savings or retirement program can have on your bottom line, the interest only mortgage doesn’t really have that much to offer in the reality of tax savings, or tax deferment; yes, it’s true that your mortgage interest is tax deductible, but not on a one-to-one ratio. Tax deferred retirement accounts, even SEPs, for the self-employed person have a one-to-one ratio of tax savings.
Another long-term financial planning consideration: when you would usually have paid out a regularly amortized loan, you will still be paying on the interest only mortgage. What could the potential savings be, for you, if you weren’t still paying on a mortgage? The time value of money is an idea that few consumers ever learn to appreciate. It means the dollar you have today, will be worth less tomorrow than it is today, therefore saving today yields a much better advantage than waiting until you’re 35 or 40 to begin saving and planning for retirement.
Mostly, your home is your greatest asset, and is the only savings that many consumers have managed to accrue. If the only payments you have made were for the interest due on the principal, you in fact have no accumulated savings. Now, that might not be an issue for people in their 20s or early 30s; however, by the time you reach your 40s, you have begun to contemplate retirement, and ways to save for that stage of your life.
As stated earlier, caution and good sound financial planning may determine that an interest only mortgage will benefit you greatly. But, this option should only be considered only after you had taken time for careful consideration and good financial planning.
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Disclaimer:
The general information provided by http://MortgagePalace.blogspot.com is intended as an educational purpose only, and should not be interpreted as legal advice. The law varies drastically by location and legal specialty, and http://MortgagePalace.blogspot.com makes no promises about the accuracy or completeness of the information provided. You should not rely on our information when making legal decisions. We recommend that you consult with a lawyer to get professional legal advice on how best to deal with your situation.
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** Attn Ezine editors / Site owners **
Feel free to reprint this article in its entirety in your ezine, blog, autoresponder, or on your site so long as you put a link back to this original post, leave all links in place, and do not modify the content in anyway.
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Long-term investments, those with capital gains, and purposes other than a quick profit, I don’t think are candidates for the interest only mortgage. The interest only mortgage doesn’t present much in the way of building and increasing investment value, because you simply never increase the value of the asset to you. You increase the value of the loan for the lending institution, because you are continually providing a profitable situation for the lender. Your principal investment responsibility never decreases.
What about the short-term implications and your financial preparation? Well, this leaves many doors unopened and many avenues unexplored. However, given the fact that you’re considering the end result of the interest only mortgage product on your financial planning expectations, there aren’t very many “short-term” considerations open for discussion. The only short-term benefit to interest only is that your monthly payment is frequently very low during the term of the interest only payment.
When you analyze the impact your 401(k), an MSA, an IRA, or any other tax deferred savings or retirement program can have on your bottom line, the interest only mortgage doesn’t really have that much to offer in the reality of tax savings, or tax deferment; yes, it’s true that your mortgage interest is tax deductible, but not on a one-to-one ratio. Tax deferred retirement accounts, even SEPs, for the self-employed person have a one-to-one ratio of tax savings.
Another long-term financial planning consideration: when you would usually have paid out a regularly amortized loan, you will still be paying on the interest only mortgage. What could the potential savings be, for you, if you weren’t still paying on a mortgage? The time value of money is an idea that few consumers ever learn to appreciate. It means the dollar you have today, will be worth less tomorrow than it is today, therefore saving today yields a much better advantage than waiting until you’re 35 or 40 to begin saving and planning for retirement.
Mostly, your home is your greatest asset, and is the only savings that many consumers have managed to accrue. If the only payments you have made were for the interest due on the principal, you in fact have no accumulated savings. Now, that might not be an issue for people in their 20s or early 30s; however, by the time you reach your 40s, you have begun to contemplate retirement, and ways to save for that stage of your life.
As stated earlier, caution and good sound financial planning may determine that an interest only mortgage will benefit you greatly. But, this option should only be considered only after you had taken time for careful consideration and good financial planning.
-=-=-==-=-=-=-==-=-=-=-=-=-=-=-=-=-=-=-
Disclaimer:
The general information provided by http://MortgagePalace.blogspot.com is intended as an educational purpose only, and should not be interpreted as legal advice. The law varies drastically by location and legal specialty, and http://MortgagePalace.blogspot.com makes no promises about the accuracy or completeness of the information provided. You should not rely on our information when making legal decisions. We recommend that you consult with a lawyer to get professional legal advice on how best to deal with your situation.
-=-=-==-=-=-=-==-=-=-=-=-=-=-=-=-=-=-=-
** Attn Ezine editors / Site owners **
Feel free to reprint this article in its entirety in your ezine, blog, autoresponder, or on your site so long as you put a link back to this original post, leave all links in place, and do not modify the content in anyway.
-=-=-==-=-=-=-==-=-=-=-=-=-=-=-=-=-=-=-
posted at
7:07 AM
1 Comments:
Great article,
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