Lending Company Puts Forth A New Philosophy
An interesting concept is being put forward by a company called
Global Equity Lending which, according to them,is rooted in the
fact that building a secure financial future is more difficult
than ever.The rules are changing and perhaps the old practices
need to be revamped.GEL calls its new philosophy, "Harnessing
The Power of Your Mortgage" In 2004,credit card debt accounted
for over half of the $2.1 trillion of consumer debt in the U.S.,
quadrupling over the last decade.Today,the average American
household has $9,000 of credit card debt at 16% interest.To pay
that average off,at that interest rate would take ten
years,totaling over $8,000 in interest when all is said and
done.The financial impact of this,which is virtually unrealized
is devastating.GEL claims to have a better way.Their thinking is
that since you must borrow money over the coarse of life,why not
borrow it as inexpensively as possible.Credit cards,auto
loans,and personal loans are all high interest and non
deductable.So why not harness the power of your mortgage?
According to GEL,Americans operate under a mindset,when it
comes to personal finance,that has been burned into our
country's psyche from the days of the great depression.That
philosophy is as such:First get the lowest rate
mortgage,then,set up a bi-weekly payment plan,and,whenever
possible send in additional payments.This way you pay off your
mortgage as soon as possible. Sound good to me,right?Well,much
to my suprise,this company claims that is exactly what we should
NOT be doing!On the contrary,their idea is one which is echoed
by New York Times Best Selling author of "The New Rules Of
Money",Rick Edelman,who says,"You should get a big,30 year
mortgage and never pay it off."Edelman and GEL put rules forth
which read like this:
1.Never send extra money to your mortgage 2.Stay away from
bi-weekly plans. 3.Make the smallest payment with the biggest
tax break. 4.Putting extra money toward your mortgage is like
putting it under the matress.
To back up his claim,Edelman offers five distinct reasons why
you should carry a long loan:
1.Mortgages don't lower your homes value.Your home will grow in
value whether or not you have a mortgage. 2.Your mortgage is the
cheapest money you'll ever buy.Why pay credit card at 18%,when
you can borrow at rates under 7%. 3.Your mortgage is the best
way to lower your taxes.There aren't many tax breaks left.
Mortage loans,unlike credit cards and car loans are fully tax
deductable. 4.You should get cash out of you house while you
still can.You may find it difficult to get a loan if something
like a loss of job comes up. 5.Mortgages become cheaper over
time.Most times your payment will stay the same over the years
while your income rises,making it easier to pay over time.
To further illustrate their beliefs,GEL presentations include a
case study called,"The Tale of Two Brothers", where they do a
financial comparison of two fictional brothers.In the
story,Brother A,as he is called follows the "old" way of
thinking,while his brother(yes,you guessed it,brother B)uses GEL
and Edelman's theory.The results of the study find Brother B
with almost a one million dollar advantage over Brother A.The
full hypothetical can be viewed on http://yourbighouse.com, but
the jist is that the second brother used the money he saved
carrying an interest only loan,or GEL's famous "power
option"loan to invest in other places.That,combined with the
mortgage tax breaks lead to the million dollar separation after
30 years.
So,if you believe in this new way of thinking,and are ready to
follow the model(in other words, REALLY, put that extra money to
work for you),then I believe an interest only loan or GEL's
power option loan is the way to go,but be careful.
For more info on this new philosophy,go to
http://YourBigHouse.com