Friday, November 3, 2017



The family home is a real estate, not an ATM from which to withdraw equity. A HELOC  is not an investment strategy any more than paying full boat for life insurance and borrowing your cash back at the current rate. A good investment is paying off a substantial debt so you can free up cash flow for future investments.

One additional principal only (not escrow or PMI) payment each year will reduce your 30 year mortgage to about 23 years (saving up to $56,000 at 6.5%). Two additional principle only  payments will drop your 30-year mortgage to about 17 years, while making twelve extra principle payments will allow you to pay off a 30 year mortgage in 10 years! Your lender likes you to pay mostly interest on the whole loan at the beginning, not equally through the term because of how your ratios are amortized, so the wise person adds an extra principle payment or two per year to reduce the loan term.  PMI and interest payments may be changed by your lender, however the wise borrower uses their freedom to make prepayments, since debtors pay interest on what they owe every month.  

While home improvement contractors and town assessors like you to make big investments in renovations, your wise financial planning self likes debt resolution and income creation through designated asset allocation. Perceived benefits of debt with a low (<5%) mortgage rate are: 1) the fact money gets easier to earn in the future due to inflation, 2)the interest expenses tax write off may be valuable, and c), you might more money investing those 2 payments a year somewhere else.

I have learned a lot since 1996 as a licensed real estate agent in Connecticut, and enjoy discussing options of wise planning, when buying, selling or investing real estates. As a Connecticut Fidicuary REALTOR since 1996 I advise you to complete due diligence with your fiduciary accountant or financial planner as well. ©David Carr 11.3.17 All Rights Reserved 203-877-2704 x 400826

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