The truth of the matter is that mortgage money is absolutely the cheapest borrowing you can get today. Even with all the media about the mortgage industry issues, it still can't be beat as the source of low cost cash.
Because the quasi-government agencies standardize the huge pools of mortgages on the market, mortgage-backed securities (MBS) become attractive investment vehicles for institutional money.
This means pension funds, insurance companies and banks make billions of dollars available for mortgages. In short, the money is there and readily available for you to borrow.
The money is available at the low cost and is also highly liquid.
Liquidity created by this massive source of money along with a competitive marketplace make this type of borrowing extremely cheap compared to any other kind of financing you could ever acquire. Even though mortgage borrowing has become a little more difficult these days, it is still the lowest cost borrowing you are going to find anywhere.
The home loan market created in our modern mortgage industry provides readily available money that is traded just like stocks and bonds. This highly liquid environment is the reason for such low rates. With cheap money so easy to get, you the consumer are the winner.
Let’s take a look at just what a great deal this really is:
Let’s say you are in a combined federal and state tax bracket of 33% and your mortgage interest paid in one year is $10,000. That money spent on interest didn’t cost you $10,000.
When the smoke cleared, you really paid only $6,667 because the IRS sent you a refund for 33% of it. Our government encourages homeownership so the cost of mortgage borrowing can be deducted from your income at tax time.
No other personal borrowing you do will give such a marvelous benefit.
There are even mortgages out there where the entire payment can be deducted. These are called interest-only loans. Combine tax deductibility with low market rates and the availability of mortgage instruments where your entire payment can be deducted from your income … you end up with a sure bet in wealth creation.
What’s the number one reason mortgage financing leaves all other forms of financing in the dust?
It’s the great tax advantages offered by good old Uncle Sam.
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If you’d like some great dinner conversation, stay tuned for next week’s lesson. Not only will you find out why the inventor of chess lost his head, but you’ll also get some great insights into building your wealth the way the wealthy do.
Before you forget and get caught up in the excitement of seeing your financial status improve by leaps and bounds, don’t forget to send your loved ones a no-cost GIFT preview copy. It costs you nothing and you’ll be giving them one of the most valuable resources
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