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Many
people today have lost sight of the incredible success that
home ownership have been over time. Our parents and
grandparents realized enormous returns by the appreciation
in the value of their home and the power of mortgage financing.
While no one can predict what will happen in the future,
a review of past performances can add an important perspective.
Mortgage financing is no more than a loan, which gets a
better interest rate and longer term because it is secured
by your home.
We often hear that debt is bad and that Americans have too
much debt. But others believe there is a difference
between "good debt" and "bad debt". "Good debt" is
debt that allows you to buy appreciating assets like the
homes in New Jersey have been. Over time, the value
of the homes has gone up while the debt from the monthly
mortgage payments has gone down. "Bad debt" is the
debt such as credit cards that people use to spend on depreciating
or valueless items like clothing, vacations or cars.
"Bad debt" is the one that people are advised to avoid or
control.
Mortgaging financing is regarded as "good debt" because
it combines two powerful forces. First, you can use
the power of leverage (i.e., less of your cash and more
of other peoples' money) to acquire an asset, which has
historically generated phenomenal appreciation with the
longest repayment period (i.e., 30 years). Second,
through the tax deductibility of the interest, most purchasers
can find that the government is actually giving them a powerful
"subsidy". Some call this the "last great tax shelter"
and many purchasers find that their income tax savings can
amount to about a third of their mortgage interest payment.
Your accountant would be a wonderful resource to check with.
Viewed in this light, your mortgage financing can be used
to acquire two distinct assets. The first is that
you mortgage financing can fund the purchase of the home
of your dreams. The second, is that you mortgage financing
can be used to purchase the upgrades and extras that become
extremely affordable when the payments are spread out over
thirty years and when the payments are looked at after the
income tax savings. Rather than paying "cash" after
closing, using high interest non-deductible credit card
debt or "going without", mortgage financing gives you the
best of both worlds - you get to enjoy your dream home today
and start your new "investment" appreciating today.
Remember too, that you may ultimately recover the fully
appreciated cost of your home and most upgrades when you
sell your home. Many people, at that point, will have
only have repaid a small part of their debt yet will still
realize a profit based on the total value of their home.
Better yet, various provisions of the tax law may allow
you to exclude the gain on your home when you ultimately
sell it.
The many types, kinds and costs of mortgage financing can
often be confusing. Both Commerce Bank and Homestar
Mortgage are two sources of mortgages that have proven to
be convenient and reliable.
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