Debt Free as easy as 1, 2, 3!

In my last post I talked about the seriousness of debt in America.  I was …and still am… incensed that the Treasury and our government think that the only way out of our current economic crisis is to have Americans spend more!  It’s craziness!

I have taken a new approach and it is unbelievabley exciting.  I am using technology to get myself out of debt.  If you have a moment I want to tell you a little story about my own situation.

You see, I own a mortgage company, and we’re not doing so well right now.  LOL.  But that’s okay, I’m blessed with a beautiful wife, good health and the God given talent to know when I have to change my business and my life to succeed.

I own a home in the burbs and two investment properties.  I have about $20K in debt associated with my business.  Total all the money I owe and it is over $750,000.  That’s three quarters of a million dollars!  It’s a little daunting to think I owe this much money, especially since I’m not wealthy by any stretch of the imagination.

My rentals break even every month, my mortgage biz is in the tank and my wife got laid off from her architecture job.  Thank the good lord above for the severance package.  Anyway, we would love to lower the interest rate on all of our mortgages, but with an income equal to our debt payment every month, we don’t qualify.

So I sat down to try and figure out how I could get out of debt.  Sell the rentals?  Not in this market, I’d take a huge loss.  Sell the primary, same thing, and I lose all that equity.  Then I found a better answer….

Technology!

There is a lot to be said about technology and what it has done for our country and our standard of living.  Now there is a tool that can help me become DEBT FREE in a very short period of time.  Under my current repayment structure, I will be debt free in 35-37 years (that’s because of some of the interest only mortgages I have.) 

However, using this software and paying my bills the way the software instructs me to, I can be DEBT FREE in 16 years without changing my income structure.  How is this possible you might ask?  I know I did, I couldn’t believe it!

Well I did some research.  The software recognizes long-term debt in two categories, open ended and closed ended debt.  In the closed end debt your interest payments are static and are set on an amortization schedule that gives the advantage tot he bank.  You pay them the interest first and the majority of the principal is paid at the back of the loan.  Good for the bank, bad for you.

In an open ended loan, an equity line or a credit card, the interest calculation is dynamic.  Interest is calculated based on the average daily balance.  The software picks strategic times throughout the year and within the am schedule of the closed end loan and uses the open end debt to pay off chunks of principal in the closed in loan. 

This strategy is important because the larger the chunks of principal that are paid on the closed end loan, the more principal reduction you will achieve with the regular payments on that loan.  Once the debt is transferred to the open end loan, the software has you transfer income into that loan to lower its balance immediately.

At first blush this sounds a little scary, but here’s the important part.  You pay your monthly bills out of the open end loan.  This has a two fold effect on your debt.  First, it lowers the average daily balance of the open ended loan.  This means that you are actually paying a lower effective rate on the principal balance that was ‘in’ the closed end loan.  Second, it gives the ability to operate your home finances in the same fashion you always have, there is very little change to the way you live your life.

Under this program I will save over $450,000 in interest payments.  Even if I sell the investment properties in 7-10 years, I will increase the equity in those properties by more than 10 times the current schedule!  That will mean hundreds of thousands of dollars in my pocket.

Do you want to be DEBT FREE?  I am so excited about this program I have added it as a product in my company.  If you can’t refinance and you want to get out of debt, or if you can refinance and create lower payments and you want to use that payment savings to get out of debt faster, I would like to show you what I can offer.

Give me a call and become debt free today.

Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please call 770-350-7373 or email mgross@dividendamerica.com

Debt In America

Everybody is wondering about the economic crisis. What caused it, how do we get out of it? What’s next?

By all accounts, the experts say that America and the world have been on a spending binge. This ‘all nighter’ was precipitated by the availability of easy credit. The entire world is guilty.

Our appetite for spending and our willingness to ignore the lessons of the past concerning debt have fully leveraged the world’s economic systems. The pain is being felt everywhere. Europe is in recession, China is experiencing hyper inflation, Russia and Brazil’s economies are faltering.

This debt is a time bomb and the pain is everywhere and the only answer the so-called experts have is to find ways to increase the availability of money to the consumer to continue to encourage them to spend. Just recently Treasury Secretary Paulson suggested a shift in the bailout funds.

Now they will not focus on buying non-performing mortgages, but instead they will use the TARP (Troubled Asset Relief Program) to extend easy credit to consumers. What?!

Isn’t this the EXACT problem that caused this mess in the first place? America is leveraged, fully leveraged! Our government, our people, our businesses are fully leveraged and we can’t borrower or spend our way out of this mess.

In this season of Thanks Giving, we need to embrace the gift that has been given us by the recent political environment. Whether you agree with the winner of the election or not is not important. The message that was sent is.

The message was that it is time for CHANGE. While many people did not know what kind of change was needed or even what kind of change they voted for, they knew something had to change.

I humbly submit to you that I know what change is needed. A change is required in the way that we see and use debt, both as individuals and as a nation. The most patriotic thing we can do as citizens is change.

How can we change? Stop borrowing, start paying off debt. Find every way possible to pay off debt and change the way we live our lives.

This may sound funny coming from a mortgage guy. I agree, but I’ve changed. I’ve put my money where my mouth is. I’ve invested $3,500 of my own hard earned money in a program that will help me manage and reduce my debt!

This program is not right for everyone. If you have a great income and all you have is debt on your primary home, then changing over to a 15 year mortgage and making extra payments every month may be enough.

However, if you are like me and you have multiple homes (a primary and two investment properties) and you have business debt (approx. $20,000) then this may be an answer for you. Under by current debt structure I will be debt free in about 40 years. I would be 85 years old!

I will be debt free in 18 years instead of 40 years! If I can earn more money I will be done even sooner. Just an additional $2,000 per month income will lower my ‘finish’ date to 7.5 years.

If I can do this, I will be 53 and debt free! I will save hundreds of thousands of dollars in interest payments. I will change my life!

Will you?

Even if you don’t own a home but you are $20,000, $30,000 even up to $80,000 in credit card debt, or school debt or automobile debt. I can help.

Those of you who know me and trust my advice know that I don’t promote my ideas lightly. I have advised people who don’t need a mortgage not to change. I have helped others consolidate debt to take the savings and invest or apply the payment savings to further reduce debt.

I truly believe that debt can be used responsibly but we must get out of debt immediately. Now I have a way to help my client further. I can help you get out of debt faster.

If you won a home and have -0- discretionary income and can’t save a dime, we can use your home to consolidate your debt and create payment savings (discretionary income) and then show you how our unique software can help you be debt free by cutting that new mortgage payoff time by 1/3 to 1/2!

It’s time for a change! Give me a call and let’s see if the time is right for you.

Michael Gross, President, Dividend America Mortgage

Contact me at 770-350-7373 or mgross@dividendamerica.com

Don’t Play the Rate Game!

Don’t playt he rate game, here’s why!  The chart to the right shows the 10-Year Treasury Yield for October 8th, 2008.  The Yield shot up to 3.72%, up 21 basis point from the previous day!

How could this be possible?  Didn’t the Fed announce that they were dropping the Fed Funds rate by 0.50% today?  Didn’t that reporter just say that rates were lower and this was being done to heat up the economy?

Now everyone is demanding a lower rate!  After all the Fed just lowered the rates and everyone should expect their rate will be lowered too!  Correct?

But hold on just a minute.  That’s no really how it works.  You see the Fed Funds rate controls short-term lending.  This would be the rates tied to your car loans, furniture and appliance purchases and credit card rates.  If you want a lower rate on something, call that credit card company and demand a lower rate from them.

Mortgage professionals deal in long-term rates.  These rates are set in the MBS (Mortgage Backed Securities) market and they closely follow the yield on the 10-Year Treasury Bond. (see the chart above)  As you can see the yield on this bond jumped drastically.  A 20+ basis point jump is unheard of in a market that thinks a 5 basis point swing is volatile.

In layman’s terms, this means that the interest rates on long-term debt is increasing today, not decreasing.  Let me try to simplify why this is…..

When people buy bonds they are seeking two things; safety and income.  When the Fed lowers the interest rate on short-term debt they are trying to stimulate the economy.  Essentially there ain’t enough consumin’ goin’ on and they are trying to get the party started …..to coin a line from an old 90′s club tune…. let’s get this party start right! let’s get this party started quickly! RIGHT!

When the econ heats up you get inflation.  Inflation eats away at the value and the income of fixed assets like bonds.  So investors sell the bonds rapidly because they are better off putting their money under the mattress than having it in stocks or bonds at the moment.

So as these bonds get sold off rapidly the laws of supply and demand come into play.  There is an abundant supply of bonds for sale but a lack of buyers.  This causes the price of the bonds to decline rapidly.  As the price declines the yield increases.  Since long-term interest rates are tied to bond yields, BAM, long-term interest rise.

So for the time being rates on long-term debt will rise or in a best case scenario, the will remain unchanged.  If the economy continues to deteriorate we may see interest rates ease.  The bottom line is that you should lock in gains now.  If you feel that the rate you have chosen on your long-term debt is good then lock it down and close the loan.

In this credit crisis it is to risky to play the ‘rate watch’ game.  Make a solid decision about what is right for you, your family and your business and lock it in.  Then spend the next couple of years doing all that you can do to eliminate the debt as quickly as possible. 

And then let’s pray that whoever is the next President of our great nation understands how to get our economy moving again.

Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please call 770-350-7373 or email mgross@dividendamerica.com

Housing Bill….Housing Debacle?

The Housing Bill passed both houses of congress with flying colors and now it seems that a threatened veto by the president has been reconsidered and he will sign the bill after all. So is the housing bill good or bad for America?

Let’s take a look at some of the finer points in the legislation.

· $7,500 Tax Credit – Yes that’s right, for those of us who buy a foreclosed home as a first time homebuyer, there is a tax credit. But wait, not so fast, the credit has to be paid back….

What, paid back? How is that a credit then? Sounds like Mr. Reed and Ms. Pelosi pulled a fast one. If you take the credit, you’ll have to pay it back in equal installments over the next 15 years.

· Increase in Conforming Loan Limits for Fannie Mae – Under the current system, home loans greater than 417,000 are considered to Jumbo Loans. Under this provision the new conforming limit will be $625,500.

This is good news for those of you were forced to take a Jumbo loan when you bought or refinanced your home in the past. If you have a loan amount between $417,001 and $625,500 it is time to investigate whether a lower rate is available! Call Today!

· FHA Revamped and Modernized – The good news is that FHA will be revamped and modernized and will act as America’s major subprime player in the mortgage market. The bad news is that the bill takes away down payment assistance.

If you are in trouble and on the verge of foreclosure, FHA may be the answer. Refinancing with an FHA loan is exactly what this new program is for.

However, if you are one of the more than 250,000 citizens each year that depend on down payment assistance in conjunction with an FHA loan, the Democrat controlled congress (you know, the ones who are ‘for’ the little people) just kicked you to the curb.

And, if you are a real estate investor, this means that your flip strategies with homes in the first time homebuyer market may be at risk. There are resources available to help you sell your homes using down payment assistance but they will now be very specialized sources and may require buyers to take certain home ownership courses to qualify. (for information on these sources visit dividendamerica.com and schedule a consultation)

The bill is a mix of good and bad, give and take. To be fair, this bill is more about giving stock market investors confidence in the mortgage market than about helping the everyday citizen.

As with all things government does, this legislation is a huge compromise that could have been better but is a step in the right direction.

For more information read the article on MarketWatch.com: http://www.marketwatch.com/news/story/fine-print-housing-bill-mutes/story.aspx?guid=8AA21F55-D848-4076-B9EF-282FEAD95B1D&print=true&dist=printMidSection

Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please contact Mr. Gross on his direct line at 770-350-7373 or via email at mgross@dividendamerica.com