Advanced Mortgage Tricks

Advanced Refinance Tricks For the Financially Well Off

Got plenty of money socked away for the kids’ college? Already have a retirement plan and funding it well? When someone asks about an emergency fund do you think, sure, which account would I use? Then, here is a trick for you.

Mortgage interest rates are at historic lows. As I write this, it wouldn’t be hard at all to get a 3% mortgage if you have good credit and put 20%+ down.

What if, you took $100,000 out of your mortgage with a refinance that lowered your interest rate enough to cover all closing costs, and then, put that $100,000 into a solid dividend paying stock?

Just for example, right now, Verizon pays something like 4.85% per year at its current $52.50 stock price.

If you took the $100,000 you got from your cash out refi, and invested in in Verizon stock as a long-term investment, Verzion would spend the next 10 or 20 years paying you the equivalent of 4.85% on your $100,000 stock investment. Which means you are earning more on your investment than you are paying on the extra mortgage principal. Now, you do have to pay 15% qualified dividend tax on your interest, but you also get to deduct the interest on the extra $100,000 in your mortgage, so it still comes out ahead for virtually everyone. The higher your tax bracket, the better it works.

Here is the great part. Unlike a lot of other ways you might raise $100,000, you still get to keep your original investment (the house) and all of its capital appreciation! So, you still make every penny you would have made on the house, all while coming out ahead on the extra interest. And, obviously, if Verizon manages any capital appreciation while you are holding it for the next 5, 10, or 20 years, you also get to keep all of that as well.

If you get luck and interest rates stay this low, or if they come back to this level later on, you could pull this same trick again assuming your home’s value increases. Eventually, you could have more money invested in stock than your house is worth, all while never paying a penny for any of those investments!

advanced mortgage tricks ace up your sleeve

More to come soon…

In the meantime, check out my personal finance app reviews:

If you need tax forms, sometimes libraries have them, but more and more, you will have to download them yourself from the IRS website.

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