Get Rich, Even If You Have A Mortgage
The term mortgage comes from the idea that the person who has it is saddled with debt until the end of their lives (hence the “mort” part of the word).
And we all know that debt leads to poverty. You’re forever paying back the loan, plus interest, sapping your wealth, and leaving you with less money overall.
But it turns out that having a mortgage and getting rich aren’t two mutually exclusive things. In fact, you can actually view your home loan as a tool to get you to the promised land of wealth and abundance faster.
Understanding Mortgage Payments
It’s worth understanding what mortgage payments actually are. They’re not just a payment you have to make to the bank every month. Instead, they are a way of building wealth, if you do them right.
The principal you pay back is actually just an equity transfer. Before you pay back your mortgage, the bank has rights to the equity in your home. If you can’t make payments, they can simply repossess your home and sell it to generate the needed cash.
When you do make payments, though, you build up equity. Your bank owns less of your property, and you own more of it. In other words, paying a mortgage is like putting money into a house-shaped piggy bank. Eventually, you pay off the loan and the property is yours.
Ultimately, the bank only makes money via the interest you pay. So if you can cut this to a minimum, you’re in a much better position financially.
Banks will usually just get you to pay interest for as long as possible so that they make the most money over the long-run. However, you can actually lower how much they get using offset financing. With an offset calculator you can work out the extra interest you’ll save if you pay off your mortgage early. Shortening it by just a few years can save you tens of thousands of dollars in interest. The savings are quite remarkable.
The other thing that you can do is look for cheap variable rates mortgages. Most economists believe that capital will remain cheap for a long time yet because of the supply of labor entering the markets in Asia. And so that means that the period of low-interest rates that we’ve seen will likely continue for another decade or so.
When it comes to mortgages, that’s a long time. That’s because the first ten years are usually the most important. That’s when the majority of the interest on the loan occurs because the principal is high.
Using a variable rate mortgage gets you the cheapest deals and helps you to cut fees. Interest rates are unlikely to rise for demographic and government debt reasons, so taking out a variable rate loan is probably safe at the moment. Always ask your financial advisors about issues such as these.
So getting rich, even if you have a mortgage is entirely possible. You don’t have to set up a business or understand the stock market. You just need perseverance.