If you are JUST looking for a home loan then you are looking for a commodity and price is your only concern. Research prices and then have different companies compete by sharing their paperwork with one another. www.bankrate.com is a good site to begin with. You can get an estimate on what a mortgage in your area should run.
If, on the other hand, you are looking at increasing your overall net worth then you want to talk to a mortgage planner. They see the big picture and don't make you sacrifice your long-term wealth potential for their short-term commission. A mortgage planner will have you consider the asset and liability side of your books and treat a mortgage appropriately. If you need one let me know and I can make a suggestion. I've felt comfortable referring my clients to him in the past and he has done a good job.
Charles
Showing posts with label net worth. Show all posts
Showing posts with label net worth. Show all posts
Wednesday, October 29, 2008
Should I get a mortgage?
If your question is PURELY from a financial standpoint then here are some thoughts. I begin that way because mortgages usually have a psychological aspect that often outweighs the financial (ie- someone who says, "I'm just happy not to have a mortgage.")
Mortgage or no mortgage- who cares. Instead, think NET WORTH. When your end financial goal is to increase your personal net worth then all purchasable items become one of two things: an asset or a liability. Both should be used with the goal of increasing net worth. 4 years ago I would have said, take the mortgage. Why? Because you could get a low cost mortgage locked in for 10 years at 4-ish% then invest in a high quality fixed instrument for the same term at 5-ish%. Then you could write off the interest (to an extent). The bottom line was that you had your bond paying your mortgage and you were able to net money off the spread... thus, increasing net worth. Some people may gripe about this strategy but the fact is I did it for a client and it continues to work exactly the way we planned it. Today you're not going to find the fixed 4% mortgage or the high quality 5% income product. No, if given a choice I would not do the mortgage in today's environment.
Another component. With the above strategy you only use low risk products. You wouldn't use an adjustable mortgage and you would ONLY use high quality fixed investments. You need equal amount of risk on each side to properly counter balance your leverage (mortgage). You cannot offset the potential risk involved with using the stock market (US or non-US). So I would have to recommend against the strategy you described. As for advisors, get advice from someone who is referred to you by a trusted source. Make sure their fees are reasonable and they know what they are talking about. I recommend only using someone with the CFP credentials behind their name. I wouldn't stress about what "type" they are (ie- commission, fee based, fee only, etc). After 10 years in the business I've seen good, bad and ugly on all sides. The PERSON brings integrity, not the firm, the designation or the type of practice they run.
Hope that helps, CRG”
Mortgage or no mortgage- who cares. Instead, think NET WORTH. When your end financial goal is to increase your personal net worth then all purchasable items become one of two things: an asset or a liability. Both should be used with the goal of increasing net worth. 4 years ago I would have said, take the mortgage. Why? Because you could get a low cost mortgage locked in for 10 years at 4-ish% then invest in a high quality fixed instrument for the same term at 5-ish%. Then you could write off the interest (to an extent). The bottom line was that you had your bond paying your mortgage and you were able to net money off the spread... thus, increasing net worth. Some people may gripe about this strategy but the fact is I did it for a client and it continues to work exactly the way we planned it. Today you're not going to find the fixed 4% mortgage or the high quality 5% income product. No, if given a choice I would not do the mortgage in today's environment.
Another component. With the above strategy you only use low risk products. You wouldn't use an adjustable mortgage and you would ONLY use high quality fixed investments. You need equal amount of risk on each side to properly counter balance your leverage (mortgage). You cannot offset the potential risk involved with using the stock market (US or non-US). So I would have to recommend against the strategy you described. As for advisors, get advice from someone who is referred to you by a trusted source. Make sure their fees are reasonable and they know what they are talking about. I recommend only using someone with the CFP credentials behind their name. I wouldn't stress about what "type" they are (ie- commission, fee based, fee only, etc). After 10 years in the business I've seen good, bad and ugly on all sides. The PERSON brings integrity, not the firm, the designation or the type of practice they run.
Hope that helps, CRG”
Subscribe to:
Posts (Atom)