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| WHEN IS IT GOOD TO GO INTO DEBT? |
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We advocate getting out of debt as soon as possible and staying out as long as possible. There is, however, an exception to that rule. It is wise to go into debt if (This is Important) the borrowed money can be invested at a higher rate than is being charged, and if the investment carries minimal risk. For example, it would be wise to borrow at 10% if the money will earn 20% and not be subject to high risk.
Business loans use this model. When businesses borrow money, it is done with the assumption that they will use the funds to create goods or services that will cover the interest and principle and turn a profit. This also is the rationale behind the purchase of a home –- it is expected to appreciate in value faster than the rate of interest on the loan.
The Money Merge Account is a classic example of borrowing money to make money. It borrows money from an equity line-of-credit at one cost and uses it to pay down a mortgage at a much higher cost. Don’t confuse cost with rate. That is because the rate of the equity line usually will be higher than the rate of the mortgage, but the cost will be the other way around. The rate of the equity line is charged for a very short time period while the rate of the mortgage typically is charged over the entire length of the loan, 30 years being a typical example.
Another thing to remember is the length of the loan is just as important as the rate. We have been conditioned over time to focus on payment affordability vs. the impact of the overwhelming amount of debt and interest payments we are accepting when we take out a mortgage. The immense amount of debt has a far greater impact on your net worth than an extra 1/8 or 1/4 percent difference in the interest rate.
The Money Merge Account software is programmed to maximize every advantage of shortening your mortgage. This is more than just sending extra monthly payments to reduce your principle. That is an excellent plan, but it falls short of what Money Merge Account can do. While your money is accumulating in a checking or savings account waiting to be used, it is not working for you. At best, it may earn a minimal amount of interest that falls short of the inflation rate. In this case, you are actually losing value and, on top of that, you have to pay income taxes on the interest earned. When you finally do send in your extra payment for principle, the mortgage company will apply it only once each month. That means the money you save for mortgage acceleration sits idle for several weeks each month, not benefiting you and not helping to reduce your mortgage during that time. This may not seem like a big deal, but if this pattern is repeated over the course of several years, it will add up to a substantial amount.
The Money Merge Account’s software monitors your monthly cash flows and gives you perfectly timed prompts telling you when to send in your mortgage-acceleration payment and exactly how much. Most of us would be hard pressed to figure that out on our own.
To find out what the Money Merge Account can do for you, get your FREE ANALYSIS |
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