As you get older, you wait for him to blow by, and then you reel him back in, why? Caution has only a few friends, but several adversaries: Haste and Waste; after several trips around the block with these two, Caution begins to look like a much better friend.
Part of the requirement for being a friend to Cautious, is that you take the time to examine all your options, and make a good sound decision. This is when I was introduced to Financial Planning, 401(k) s, Retirement Funds, etc.
Ive told this from a story standpoint, but it is in all honesty, the truth. As you get older you do become more cautious in your investments, with your time and your money.
Interest only mortgages are one of those options, that if you are investing in real estate for the short term, and you are consulted with a reputable financial advisor, you might want to consider. Investment portfolios do not generally include real estate, so more than likely this is a business venture or an investment business.
In either situation, financial planning is a must. This is one of those options, that should however, be considered only after careful planning and thought. The trade off, may be or may not be to your benefit.
Long-term investments, those with capital gains, and purposes other than a quick profit, I dont believe are candidates for the interest only mortgage. The interest only mortgage doesnt offer much in the way of building and growing investment value, because you simply never increase the value of the asset to you.
You increase the value of the loan for the lending institution, because you are continually providing a profitable situation for the lender. Your principal investment responsibility never decreases.
What about the short-term implications and your financial planning? Well, this leaves many doors unopened and many avenues unexplored. However, given the fact that you are considering the impact of the interest only mortgage product on your financial planning expectations, there arent very many short-term considerations open for discussion.
The only short-term advantage to interest only is that your monthly payment is often very low during the term of the interest only payment.
When you consider the impact your 401(k), an MSA, an IRA, or any other tax deferred savings or retirement program can have on your bottom line, the interest only mortgage doesnt really have that much to offer in the realm of tax savings, or tax deferment; yes, its true that your mortgage interest is tax deductible, but not on a one-to-one ratio.
Tax deferred retirement accounts, even SEPs, for the self-employed individual have a one-to-one ratio of tax savings.
Another long-term financial planning consideration: when you would normally have paid out a regularly amortized loan, you will still be paying on the interest only mortgage. What could the potential savings be, for you, if you werent still paying on a mortgage?
The time value of money is a concept that few consumers ever learn to appreciate. It means the dollar you have today, will be worth less tomorrow than it is today, therefore saving today yields a much better benefit than waiting until you are 35 or 40 to begin saving and planning for retirement.
Quite often, your home is your greatest asset, and is the only savings that many consumers have managed to accumulate. If the only payments you have made were for the interest due on the principal, you effectively have no accumulated savings.
Now, that might not be an issue for someone in their 20s or early 30s; however, by the time you reach your 40s, you have begun to contemplate retirement, and ways to save for that phase of your life.
As I stated earlier, caution and good sound financial planning may determine that an interest only mortgage will benefit you greatly. But, I would only consider this option only after I had taken time for careful consideration and good financial planning.
We all have to deal with financial problems. Any individual who has been working and earning his monthly income will have faced debts at some point of time in his life. This is because there are so many expenses that we don't anticipate that crop up out of the blue and throw us off balance. As a result, we find that all our planning goes haywire. As a result, we have to keep making more changes to the same.
Many of us have to resort to the age-old method of securing loans so that we can get through the financial crunch. Sometimes we find it hard to cope with existing debts. Thus, many of us find that we are ill-equipped to handle these debt burdens. At such times, it makes sense to talk to a financial expert.
One can go in for some debt consolidation plan as well. Debt consolidation basically involves compiling all debts into one single payment plan. This helps one to plan out one's finances in order to be able to pay off the loans very quickly. What this does is that it makes the person answerable to only one creditor while also lowering the monthly payments that the borrower has been trying to meet.
Once the person in debt has decided to go in for debt consolidation, he will be required to divulge all his finance related data to the advisor so that together they can sort out the mess and find a solution to one's financial problems. This also gives one's creditors the hope that one is making efforts to settle the debt. As a result, the creditors also stop pushing further and give the borrower some breathing space.
Debt consolidation can be carried out at any level to deal with any amount of debt. However, one must follow the strategy that has already been mapped out. Deviating unnecessarily may once again place one in the debt trap from which one was trying to escape
The one downfall of having debts is that you fall into the category of people with bad debts. Hence, you may not have the best credit scores. However, if you are able to meet all the payments and successfully manage your finances, you will be able to get back on your feet and rebuild your credit ranking.
Being in debt causes stress to most people, but with a sensible financial plan, anyone will be able to deal with one's financial woes. If one has a financial plan in place, panic will not set in. In many cases, debt consolidation loans take the form of secured loans where a house or property is given as collateral. Thus, the borrower needs to make sure that his asset is safe. He can guarantee this by making payments regularly without defaulting.
If the borrower is not able to make the payments, then it is a good idea to contact the lender directly to come to a conclusion on how to close the loan and clear the existing debts. A little planning is all that it takes to become debt-free fast.
Both Ben Needles & Ajeet Khurana are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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