Be A Banker
The prevalent myth-conception is that there are only two kinds of people in the world: those who earn interest and those who pay interest. There is really a third kind of person: those who do exactly what banks and credit unions do- borrow money at a lower interest rate and invest it to earn a higher interest rate. These people accumulate a much great degree of wealth than most people, because they have learned to be their own banker. You maintain that you do not need to pay off your house to be considered “out of debt.” If you have a greater amount of assets in a liquid, safe environment than is needed to wash out liabilities, the net result is positive.
It is understandable that a thirty-year mortgage amortization schedule may look discouraging because fifteen years into the mortgage, a home buyer may still owe 75 percent of the original loan amount. Why? The interest. The principal and interest payment on a $100,000 thirty-year amortized mortgage at 7.5 percent interest is approximately $700 per month. During the thirty-year period, $700 per month will amount to a loan repayment of $252,000, or two and a half times the amount originally borrowed. This interest seems overwhelming and often motivates the home buyer to send extra principal to the mortgage company whenever possible to eliminate that monster interest. What they don’t realize is, they are killing their partner, Uncle Sam, in the process.
Every time you send an extra $100 to the mortgage company, you are in effect saying, “Here, Mr. Banker is an extra $100. Don’t pay me any interest on this. If you need it back, you will borrow it on your terms and prove there’s a need why you should have it.” Sounds ridiculous, doesn’t it?
Every time you send an extra $100 to the mortgage company, you are in effect saying, “Here, Mr. Banker is an extra $100. Don’t pay me any interest on this. If you need it back, you will borrow it on your terms and prove there’s a need why you should have it.” Sounds ridiculous, doesn’t it?
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