Once you understand how these simple words can change your generations, you will hold on to the concept with two hand and never let go. You are being conditioned to look at rate and payments all day long to keep you in debt. However, the rate you need to know is the rate at which you pay loans. Refinancing is a tool that gets you out of debt. Imaging a 200-year loan, you might be able to pay it off in 1-year – what? Because each month after you pay the structured payment, every dime you can pay interest-free, is 100% going to the loan balance. Why is it important to pay the difference monthly? Because you still have to live your life.
When you refinance your mortgage to a lower 30-year interest rate, with the knowledge of the monthly cost of a 15-year loan, you still have the same income, but now only one large debt. When you quality for a new mortgage the rate is never so high that you cannot make the payments. You have money on hand to pay an addition principal-only payment each month to your mortgage (preferable, the difference between the 30- and 15-year rate, tax refunds, rebates, any extra money). When you refinance, the original debt is paid off. By incorporating all your outstanding debts into the new mortgage, your student loans, vehicle notes, and credit cards are paid off. If you are a first time home buyer, you should try to put all your debts into the new mortgage. This can become a new trend.
Can understanding these tools help build generational wealth? Change your culture? Change the narrative in your community? If you are able to pay off your mortgage in 5 to 10 years, what can this mean for the rest of your life?
Picture: The Met Cloisters Museum:
