By going with an interest only mortgage you create a cash position that can be accessed at critical times you need the money. For instance, through transferring the money you save from a smaller mortgage payment over to an investment account you create a liquid cash position. The problem and question for many is if this money is tax deferred and tax free.
The traditional 12 or 15 year home mortgage plan is a way for someone to establish no debt but the problem is if you have credit card debt you are in a worse situation. Mortgage debt is cheap preferred debt while credit cards and other types of debt are not preferred and cost you more in interest over the long term. A longer term mortgage that is 30 years and is interest only can actually work out better if you establish the right type of investment strategy.
There can be problems with this strategy in the form of what insurance agents and the government refer to as "mecing" a plan. If you mess up this type of plan you can create a taxable event. When you create a taxable event all of a sudden your strategy ends up costing you a lot in tax liability costs and the whole system goes down the drain. It is important to follow the advice of a financial planner so the system works for you and not against you.
The way to make a strategy like this work for you is to speak with a financial planner who knows how to create a good mortgage. You will also need to find someone who can put together a life insurance plan that lets you accumulate wealth while having only a small amount of death benefit. For someone who is young it is costly to get too much in death benefit up front.
Finally you need to make sure you speak with a qualified financial planner that knows how to fashion an home mortgage in a way that will benefit you the most. The financial planner needs to avoid creating a taxable event when creating the insurance plan to act as a bank. The end result will be cash liquidity you can use whenever you need it.
The traditional 12 or 15 year home mortgage plan is a way for someone to establish no debt but the problem is if you have credit card debt you are in a worse situation. Mortgage debt is cheap preferred debt while credit cards and other types of debt are not preferred and cost you more in interest over the long term. A longer term mortgage that is 30 years and is interest only can actually work out better if you establish the right type of investment strategy.
There can be problems with this strategy in the form of what insurance agents and the government refer to as "mecing" a plan. If you mess up this type of plan you can create a taxable event. When you create a taxable event all of a sudden your strategy ends up costing you a lot in tax liability costs and the whole system goes down the drain. It is important to follow the advice of a financial planner so the system works for you and not against you.
The way to make a strategy like this work for you is to speak with a financial planner who knows how to create a good mortgage. You will also need to find someone who can put together a life insurance plan that lets you accumulate wealth while having only a small amount of death benefit. For someone who is young it is costly to get too much in death benefit up front.
Finally you need to make sure you speak with a qualified financial planner that knows how to fashion an home mortgage in a way that will benefit you the most. The financial planner needs to avoid creating a taxable event when creating the insurance plan to act as a bank. The end result will be cash liquidity you can use whenever you need it.
About the Author:
This article is about how an interest only mortgage often creates substantial benefits for the investor looking to set up a long term investment account. In Texas financial planners set up a combination of an interest only mortgage with a life insurance policy to make compounded interest money from investments. This Texas electricity quick money building program works because it follows proven systems.
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