Wealth
Accumulation

Fact:Since you need to borrow money during the course of your lifetime,doesn't make sense to borrow money as inexpensively as possible?
You should avoid high-interest,non-deductible debt such as credit cards,auto loans and personal loans.Instead choose the better way...
The New Rules of Money
"You should get a big,30-year mortgage and never paid it off"
Ric Edelman
"A Tale of Two Brothers"
Adapted from the book,The New Rules of Money

15-year mortgage at 6.38% APR $40,000 big down payment $0 left to invest $1,383 monthly payment (56% is tax deductible first year/33% average) $1,227 average monthly net after-tax cost Sends $100 monthly to lender in effort to eliminate mortgage sooner

30-year interest-only loan at 7.42% APR $10,000 small down payment $30,000 remaining to invest $1,175 monthly payment (100% is tax-deductible first 15 years/64% average) $799 monthly net after-tax cost Adds $100 monthly to investments,plus $428 saved from lower mortgage payment,where account earns 8% rate of return

Who made the right decision?

Received $14,216 in tax savings Has $0 in savings and investments

Received $22,557 in tax savings Has $83,513 in savings and investments

What if both brothers suddenly lose their jobs?

Has no savings to get through crisis Can't get a loan-even though he has $74,320 more in equity than his brother-because he has no job Must sell his home or face foreclosure because he can't make payments At this point,it's a fire sale,so he must sell at a discount,then pay real estate commissions(6-7%)

Has $83,513 in savings to tide him over Doesn't need a loan Can easily make his mortgage payment even if he's unemployed for years Has no reason to panic he's still in control-remember...Cash is King!

How ironic: Brother "A",who never wanted a mortgage in the first place,is now in financial jeopardy because he was trying to get rid of his loan too quickly! Brother "B" the Power That Be

Results After 15 Years

Receives $25,080 in tax savings Has $30,421 in savings and investments Owns home outright

Received $67,670 in tax saving Has $282,019 in savings and investments Remaining mortgage balance is $190,000-and he has enough savings to pay it off and still have $92,019 left over,free and clear

Results After 30 Years

Brother "A" Believes in "The Old Way"-paying off the mortgage as soon as possible	Brother "B" Believes in "The New Way"-carrying a big long mortgage and never paying it off

Received $25,080 in tax savings Has $613,858 in savings and investments Owns home outright

Received $107,826 in tax savings Has $1,115,425 in savings and investments Owns home outright-so starts fresh and enjoys the same benefits once again