Home Mortgages

THE TAX ATTIC with Jerry Coon

July 7, 2011 // 0 Comments

New look at home mortgages I went to a seminar recently that forced me to think outside of my financial box, so to speak. I’m from West Michigan, so my financial box is pretty conservative. Dave Ramsey isn’t my idol—that spot is and always will be reserved for the Detroit Tiger’s great player, Al Kaline—but I do appreciate and agree with most of what he says. Dave isn’t from West Michigan, but he could be. When I say his financial box is very conservative, I might actually be understating his stance. What shook up my box concerned the speaker’s treatment of home mortgages. Dave says to get rid of the darned things as soon as possible. It’s prudent to make the term of the loan 15 years as opposed to 30; 10 would be better. Make use of strategies such as bi-weekly payments. At the very least, pay extra on the principal each month. If you can squeeze in an extra payment once a year, do it. If you can pay cash for a house, do it quickly. For goodness sakes, the higher down payment you can make on the house, the better. Don’t pay any more interest to a financial institution than you have to. The speaker at this seminar had a slightly different take on the subject of mortgages. In fact, he said there is no book of “Dave” in the bible, so don’t take everything Dave says as gospel. That got a few nervous laughs from the crowd, especially by those of us from West Michigan. Starting out, he said a 30-year term is not a bad thing for a mortgage. It may have a slightly higher interest rate than a 15-year term, but it has a substantially lower monthly payment. My thought was, regardless of the payment amount, how can a higher interest rate be okay? The speaker pointed out that the lower payment was the key. We tend to dwell on the wrong part of the equation. The lower payment allows the taxpayer to set aside the difference to use how that person wants to use the money. Over time, that difference could add up to a substantial amount and could be used to buy a car or pay for […]