10 Mortgage Reduction Strategies

[DonCampbell]

Why is it that so many people focus just on the revenue side of life ("I don't make enough", "In need a raise", "I wish I made more") however many don't pay much attention to the expense side of life. As our home mortgages are often one of the largest, but most misunderstood, expenses, simple strategies that can reduce this cost dramatically play a major role in how much free cash-flow we all have in our lives. Get rid of a mortgage faster and free up your cash flow - sounds simple. Yet so many don't have the discipline to even implement one.



In this latest blog post, we uncover 10 (of the many many) strategies you can start using today to help reduce this cost in your life. Hope you find it not only a good read, but that you commit to implementing at least 1 (not sure why not more, but gotta start somewhere ) :



Here's the link to the post (share it with others you know who have mortgages):



10 Mortgage Reduction Strategies



Then post other strategies you have used in this discussion thread.



Cheers!



Don

 

[Thomas Beyer]

Profit is the difference between revenue and expenses. Both need to be looked at, indeed !



Let me add



11) Too many peple get a fixed rate. If at all possible, always go variable. The bank does not know what rates will be in 3-5 years so they "pad" rates i.e. it acts like insurance. On average, you always always lose with insurance. Today, late fall 2013, one get 5 year money at around 3.5% and variable money at prime-0.4%, a 09% difference. On a $500,000 mortgage that is $4500/year or almost $400/month cheaper - a free meal a week - on the bank ! Or use this saving to pay the mortgage down faster.



There have been very very few periods of time where a variable rate mortgage was actually higher than a fixed rate mortgage.



12) If at all possible, go with a 25 year amortization and not 30 years, as the mortgage paydown will be so much faster. One of my top reports every quearter is the statement of mortgages owed, and it is always lower than a quarter before (unless, of course, we did a re-fi and pulled some equity out). It is one of the 3 pillars of real estate investments, what I liken to the three course meal: the main course. (The appetizer is the cash-flow and the dessert is the appreciation)



13) Paying down your 3.6% mortgage is actually a sound investment. If you are in a 40% tax bracket, a 3.6% return after tax is actually like a 6% pre-tax ROI, as 40% of 6% is 2.4%, and that is not too easy to get today. It is essentially a guaranteed 6% return, before tax. While there are investments that can be higher, there is an element of risk. Paying down your mortgage is essentially a risk-free 6% investment.



14) The decision in an investment property may be different, as you may wish to buy more assets with more revenue, especially in an appreciating market. As such, accelerated mortgage paydown may not be the desired strategy if you are still in the growth phase of your portfolio. You can usually do far better than 6% on a 25/75% levered asset that appreciates 3%/year on average !