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Home Equity:
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When a lender offers a chance to lower those monthly payments with a low-interest, home equity loan or a cash-out refinancing, it can feel like manna from heaven. But don't kid yourself; no one's passing out free lunches. When you tap home equity to pay off bills, you kiss off those high monthly credit card payments, but you don't kiss off the debt.
The lower monthly payment makes the debt look harmless. Look closer and behold the same old Big Bad Wolf; he's just decked out in Grandma's bonnet. Even though the interest rate is less and the monthly payments are low, you usually end up paying, over the long run, more than you think because the payments are stretched out over a longer period.
When debtors use home equity to pay off their bills, they usually swear to God they'll never carry a credit card balance again. But they forget to change their spending habits. They do not start a plan to save for emergencies and big-ticket items. When the car needs a new brake job....when they "need" a vacation, the plastic get resurrected and the debt cycle resumes.
Tax-deductible interest USA:
Tax-deductible interest is the war cry lenders use to prod unwary homeowners into using their precious home equity to fund major purchases and pay off debt. It sounds good until you start running the numbers.
Let's pretend you have $40,000 in 18 percent credit card debt; your current monthly payment is $1,000. Continue the $1,000 payments, and the debt is history in 62 months. Total payments will be $62,000 ($1,000 x 62) and total interest will be $22,000 ($62,000 minus $40,000). Use a 6 percent home equity loan to stretch the payments out over 180 months and payments go down to $338. Total payments will be $60,840 ($338 x 180) and total interest, $20,840 ($60,840 minus $40,000); you'll pay $1,160 more interest with the home equity loan. If you're lucky, the tax deduction will compensate for the extra $1,160, but don't count on it. The lenders are the only ones who can bank on making big bucks on home equity loans; that's why they spend big bucks marketing them.
Credit Card Debt:: No More
No more credit card debt you say. But that state of bliss is usually fleeting. Tapping home equity makes it too easy to get rid of credit card debt, Why do folks rack up so much credit card debt in the first place? Could they be living beyond their means? Most folks who use debt to get rid of debt forget to change their negative spending habits and end up deeper and deeper in the hole.Home equity loans can be expensive
Home equity is something to cherish and preserve, not deplete. Here's what no one tells you when you sign off on that home equity loan:
· Home equity is a time-proven way to accumulate wealth and provide a sense of security; when you tap it to pay off bills, you become poorer.
· Use home equity as a money tree and you could end up paying private mortgage insurance (PMI) forever.
· Credit card companies can't foreclose on your home if you run into financial difficulties. But home equity loans and cash-out refinancings are debts that are secured by your home. If you can't make the payments, you risk living in a corrugated box.
How about those loan origination fees and prepayment penalties?
For most folks, the road to getting out of debt and achieving financial independence is paved with discipline and belt tightening, not more debt. Debt paves the road to bankruptcy court.
SMERP, Smart Mortgage for Canadians:
Home Equity articles such as these help to confuse the Consumer. Dorothy Rosen writes here for USA Consumers where the rules about Interest Tax deductibility are different, For example, US Tax rules allow you to deduct the interest you paid for your mortgage in your home. A few years ago, as a US Resident, you could even deduct the interest Paid on your Visa or Master Card to the Credit Card Companies. These are US Laws that apply to USA Consumers.Canadian Tax rules are different. The interest charges on your Home Mortgage is not a tax-deductible item, usually, the way it is in the United States.. Our Smart Mortgage Plan employs skillful Canadian tax loopholes to make the home mortgage interest fully tax deductible. Now you would appreciate the cleverness in creating a tax deduction where for the majority of Canadians, no tax deduction exists. At Consumer Credit Solutions, we make it happen. WE turn the non-deductible debt into a tax deductible debt. That’s why we can safely say we put new money on the table.
Americans on the other hand already enjoy the home loan interest tax deduction. Affiliate Credit Advisors also apply similar techniques that comprehend US Tax Laws and have been able to offer tremendous savings.
Smart real estate Investing for US Residents
For US Investors, the trick is to own those TWO PROPERTIES That Uncle Sam will allow you. INTEREST ON THOSE TWO MORTGAGES IS TAX DEDUCTIBLE FOR YOU. Canadians will give an Eye Tooth for that provilege( Now that we have SMERP Action Guide only the Cheapskate Canadians must give up that Tooth!!) You see SMERP Action Guide tells exactly how Canadians could make their mortgage Tax Deductible.If you find that you have developed some equity in your US home, you can get at that equity with the help of a good Mortgage Broker or Real Estate Agent. Use the Equity as the Down Payment for your second US Property. Mortgage Interest on both properties is tax deductible to a limit of $1,000,000.00 (one million dollars) of total mortgages.
Here is the essence of OPM. Here is the essence of creative financing. Your home equity and some good credit give you access to OPM, Other Peoples Money. Use your smarts to be sure that those OPM dollars are productive. Failing that, your home equity and your OPM all go up in smoke and leave you with a giant sized headache that will last for a few years.
As for Americans European and UK Folk, Aussies and Kiwis, Asians and Africans as well, investing in Canadian real Estate, you simply hold the property as an investment property and according to Canadian Tax rules, the interest becomes tax deductible.
This is true even if your Canadian holdings are restricted yto that summer cottage by the lake! You simply make sure to rent the property and receive an income WHICH YOU MUST REPORT. As long as you receive income from the property, then the expenses beconme tax deductible in Canada as well. The big ticket deductin here is of course the mortgage interest.
For a good real estate agent skilled in smart mortgages and the use of OPM, follow these links
Arizona, California and area smart mortgage freedom from home equity
Premier Mortgage Funding, Inc.
Specializing in FHA, VA, and Conventional (prime and sub-prime) home mortgage loans with ZERO down option. Visit us online to apply.
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