Team Approach to Mortgage Lending

If your current mortgage rate is higher than the National Average, call Dustin to see if you are eligible to:

• Lower your rate
• Pay no closing costs - by committing to stay with the new lender for at least 9 months, the lender may pay all of the cost to refinance 
  
• Refinance without going deeper into debt
• With the new lower interest rate, shorten the term of your mortgage to get out of debt faster.

Now is the time for you to focus on lowering your interest rate and term to break from the bondage of debt.

Let's destroy some of the myths you have been taught.

Tax Deduction Myth: People avoid paying off their mortgage because they want the tax deduction. Due to the new tax change, over 90% of all Americans no longer get to deduct the interest on their mortgage. That $1,500 monthly mortgage payment ($18,000 yearly) may cost you $24,000 yearly (If you have to make $24,000 to take home $18,000 after taxes). Even if you did get to deduct the interest, it is usually not in your best interest to be in debt.

Investing/Debt Myth: Most people think of debt as separate from investing. Start looking at investing and debt as the same vehicle, just going in the opposite direction. Example: Tom believes he is making money on his $10,000 investment, which earned him $300 this year. Tom sees how much his projected $10,000 would be worth at retirement and does not want to lose that money. In Tom's mind, debts have nothing to do with investing. Reality check, debts have everything thing to do with investing. Tom's $10,000 investment could be used to pay off his $10,000 credit card. His credit card is costing him $2,300 yearly in interest. His $10,000 investment really lost Tom $2,000 ($300 earned -$2,300 lost in interest paid to the credit card company). Net worth is calculated by adding all your assets and subtracting your liabilities (debts). Do the same calculation with Tom's investments. Tom accumulated $10,000 in investments and accumulated $10,000 in debt. He has a $10,000 up (asset) and a $10,000 down (liability); when you look at the two together, he really has nothing ($10,000 - $10,000 = Zero). In one year, one makes $300 the other costs $2,300. The result is a loss of $2,000. Tom never sees that loss because he does not consider how much he pays each month to the credit card company. All Tom sees is that his investment went up $300, and his debt stayed about the same. If Tom just cashed in his investment and became debt free, that former credit card monthly payment would cease to exist. Tom then could start investing monthly what he used to pay in credit card payments, Thus, creating an even more significant amount in retirement. He went from having $10,000 towards retirement to now investing over $2,300 annually every year to retirement, he did this, and it did not cost him anything from his monthly cash flow.

Investing in Bonds Myth: Advisors tell their clients to invest into bonds to reduce risk. It sounds smart until you factor in what the bond is paying you compared to your debt's cost. They think they are helping you save for their future, while in reality, they are losing you money if the interest rate on your debts is higher than what you are earning on your bonds. Wake up advisors, and see the whole picture. By eliminating your mortgage expense, you may be able to retire early. Example: A person has $100,000 in savings earning only $1,000 yearly, while he has to pay $1,000 monthly on his $100,000 mortgage. To retire, he must lower his taxes and living expenses by $15,000 yearly. Paying off his mortgage saves him $1,000 monthly ($12,000 yearly) in after-tax financial pressure. Being in a 20% state and federal income tax bracket, he has to make $15,000 yearly to take home $12,000. Paying off the mortgage is like earning $15,000 yearly and netting $12,000 after taxes. Thus, by paying off the mortgage, he can retire. To pay the mortgage with the interest earned on a bond or CDs paying 2%, he would have to invest $750,000 in a bond or CDs. $750,000 X 2% = $15,000 in interest; after taxes at 20%, you take home $12,000. Paying off the house frees up the $750,000 to be invested in higher earning but higher risk investments

Debt Free Sooner Myth: I want you to be debt free, you may want to invest your way out of debt. Example: Two people with the same loan amount, same interest rate and term and both have $1,000 monthly to invest or pay down the mortgage. Person #1 decides to pay his mortgage, and Person #2 invests the extra money. The day Person #1 becomes debt-free will also be the day Person #2 could be debt free if he cashed in his investment and paid off his mortgage, assuming he earned after taxes the same rate of return as the interest rate charged on the mortgage. What happens if Person #2 earns more than the rate the mortgage is charging? Person #2 (the investor) could pay off his mortgage sooner than Person#1. What if they both lost their jobs before paying off their mortgages? Person #1 could lose his house if he had no money saved to make the mortgage payment. Person #2 withdrawals from his investments to make the house payment and not lose the house.