Thursday, October 21, 2010

Make Thousands by Getting a Mortgage

     There are many financial "gurus" out there telling you to buy a house with cash or to pay off your mortgage early.  It sounds like a great idea on the surface, but you could miss out on thousands if you take that advice.  If you can't get an interest rate under 9 percent, ignore what I'm about to say...
There are two BIG reasons to use your banker's money for your house:

      1.  Mortgage interest is tax deductible
               example:  A household in the 28% tax bracket with a $200,000 mortgage amortized over 30 years with an interest rate of 5% will save $2,781 in taxes during the first 12 months of the loan.  That same household will save $52,223 in taxes over the life of the loan!

      2.  You can invest your cash instead (and make up to thousands more than your conservative uncle Ed)
              example:  In our $200,000 example above, because you are not tying up all that cash in a house, you can invest the $200,000 into an index fund.  The S&P 500 had average annualized returns of 11.24% over the last 30 years (1980-2009).   

$200,000 invested into an S&P 500 index fund in 1980 and would be valued at $4,679,280 in 2009!  If uncle Ed only knew... 

Make even greater returns:  The Buffett System

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