Monday, August 06, 2007

The 100% Down Plan

Can you pay cash for your home? Think about that for a moment… How much do you pay in monthly mortgage payments? Now, imagine your life if you didn't have to make those payments? What could you do with that money? Save for retirement? Give to a charity?

So many people have the mortgage idea ingrained in their thinking. They can't even imagine having a paid for house.

Is it easy? Heck no! If it was easy, everybody would have a paid for house! (No, my house isn't paid for, but we're working on it).

But it is possible. There is a young man in my current Financial Peace University class who may be able to do just that. He is working hard, earning as much money as he can. He is renting a small house, and splitting the rent with a roommate. He is currently paying off all of his debt, and then will start socking away as much savings as he can. He hopes to save enough to pay for some land with cash, and then will build a house on the land.

If he is able to succeed on his plan (and since he has a plan, he's well on his way), he will end up with a paid for house in a few years. Yes, it will take hard work, and it will take time. But by putting it off, he will be in a great position for the rest of his life.

If you already have a mortgage, you can still experience this freedom. You need to pay off your mortgage as fast as you can. Don't stick with that 30 year plan. Figure how much you are able to send each month, and re-amortize your current mortgage. You can find amortization calculators on the Internet. You don't need to refinance (unless you have an adjustable rate mortgage. In that case, refinance NOW!)

Just use the amortization calculator to figure out how soon you can have your house paid off. You can either set a time goal (7 years, for example) and calculate the payment and start paying that, or use the calculator to see when your house will be paid for based on the payment you are able to make.

MAKE IT AUTOMATIC! We all know that telling yourself to write a bigger check each month won't work. It just won't! So, set up the payment using your bank's online bill payment service. That way you never have to think about it. Sit back and watch that balance shrink!

Once your house is paid off, you are in the catbird seat. You can either take your old house payment and start funding mutual funds and become wealthy very quickly, or you can put that money away in savings to build up some cash for your next house.

Let's say you pay off your $120,000 house, and then start putting away your $1,000 payment into savings. In three years, your house may have increased in value to $150,000 and you will have $36,000 in savings. You can then go buy a $180,000 or $190,000 house for cash! It's amazing the power your home has once the debt is released.

Most people believe mortgages are a way of life. But the paid off home is the way to riches!

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