In conclusion, now you know how to make an asset a true asset. Keep it! This is how the rich get richer. The biggest mistake home-owners make is to sell their home when they want another one. If you sell your home and then buy a rental later, you will have to pay a higher interest rate since investment loans can only be obtained at much higher loan rates and they require higher down payments. But know, that you will want to have had the original loan on the home for at least 2 years to avoid problems when you choose to rent it out.
When it comes to loan rates, an amortized loan rate is just a joke. Do you really think that you are getting a 7%, a 5% or a 3% loan? Get serious! On the first year that you get a loan, you take a look at how your payment is allocated. If you have a $1000 monthly payment. You are most likely paying about $900/month in interest and about $100 on the principle. Let’s figure that out mathematically. Is this 3, a or 7%? Not a chance. It is 90% interest.
The funny thing about amortized interest loans is that you usually don’t even get to that promised single digit rate until 22 years into the loan. Hmmm…Who is getting ripped off here? And what is even more amusing, is that most people like to refinance their home loan every 5 years to get that extra .5% difference in rate.
Do you know that it takes about 3 years to recoup the fees from that refinance? And then in another 2 years you will be encouraged to refinance, again, to get that extra .5% rate adjustment? All the while, you are staying up at that 90% interest rate. This is the biggest joke in the loan industry. If you get a loan, NEVER refinance, just make bigger payments and pay it down sooner. The more that you pay with each payment, the less interest you are charged each month. It is like buying down your interest rate.
That concludes our series!
I hope you have enjoyed it,