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How the Affluent Manage Home Equity to Safely and Conservatively Build Wealth


If you had enough money to pay off your mortgage right now, would you? Many people would. In fact, the ‘American Dream’ is to own your own home, and to own it outright, with no mortgage. If the American Dream is so wonderful, how can we explain the fact that thousands of financially successful people, who have more than enough money to pay off their mortgage, refuse to do so. The answer? Most of what we believe about mortgages which we The answer?and Mosthome of whatequity, we believe about mortgages and home equity, learned from our parents and grandparents, which we learned from our parents is wrong. They taught us to make a and big down grandparents, They mortgage, taught us and payment, get isa wrong. fixed rate to make a big down payment, get a fixed make extra principle payments in order to pay rate mortgage, and make extra principle off your loan as early as you can. Mortgages, payments in order to pay off your loan as they said, are a necessary evil at best. early as you can. Mortgages, they said, are a necessary evil at best.

The problem with this rationale is it has become outdated. Therationale rules ofismoney The problem with this it has have become outdated. Thegrandparents, rules of moneywe will changed. Unlike our have changed. our job grandparents, no longer have Unlike the same for 30 years. In we will no longer have the same job for many cases people will switch careers five 30 years. In many cases people will switch orcareers six times. Also, unlike our grandparents, five or six times. Also, unlike our we can no longer on ourdepend company’s grandparents, we depend can no longer pension plan for a secure retirement. on our company’s pension plan for a A recent secure survey retirement. A recent Gallup showed that Gallup 75% ofsurvey workers showed that 75% of workers want to retire want to retire before the age of 60, yet only before thethey age can. of 60, yet only 25% think 25% think they can.

Unlike our grandparents, we will no longer Unlike our grandparents, we will no live in the same home for 30 years. Statistics longer live in the same home for 30 show that the average homeowner lives in years. Statistics show that the average their home for only sevenhome years. homeowner lives in their forAnd onlyunlike our grandparents, we willour nograndparents, longer keep the seven years. And unlike we will no longerforkeep the same mortgage same mortgage 30 years. According to the for 30 years. According to the Federal Federal National Mortgage Association, or National Mortgage Association, or Fannie Fannie Mae, the average American mortgage Mae, the average American mortgage lasts 4.2 years. People are refinancing their lasts 4.2 years. People are refinancing homes everyevery 4.2 4.2 years their homes yearstotoimprove improve their interest rate, restructure their debt, remodel their interest rate, restructure their debt, remodel their home, or tomoney pull out their home, or to pull out formoney investing, for investing, education or other expenses. education or other expenses. Given these Given these to statistics, it’sstatistics, difficultit’stodifficult understand why understand why so many Americans so many Americans continue to pay a high continue to pay a high interest rate interest rate premium for a 30-year fixed rate premium mortgage, when they are likely to only use

the first 4.2 years of the mortgage. We can financial planning goal, and in fact how you only conclude theyrate aremortgage, operatingwhen on outdated ultimate handle issuesplanning of homegoal, ownership financial and in may well for a 30-year fixed how you handle issues of home they are likelyfrom to only use thegenerations first 4.2 knowledge previous when factdetermine whether you achieve financial ownership may well determine whether years of the mortgage. We can only there were few options other than the 30 year success.” you achieve financial success.” conclude they are operating on outdated fixed mortgage. Wealthy Americans, those knowledge from previous generations with the ability to pay off their mortgage but when there were few options other than Why people fear mortgages, refuse to do understand how to make Why people fear mortgages, the 30 year fixedso, mortgage. Wealthy and whyyou youshouldn’t shouldn’t and why their mortgage for them. Americans, those work with the ability to pay off their mortgage but refuse to do so, In order to discover how our parents order to discover how our parents and They go against manytheir of mortgage the beliefs of andIngrandparents understand how to make got the idea that a grandparents got the idea that a mortgage traditional work for them.thinking. They put very little mortgage was a necessary evil at best, a necessary evil at best, we must go back money down, they keep their mortgage we was must go back in time to the Great in time toInthe Depression. They go against many the beliefs of choose Depression. theGreat 1920’s a commonIn the 1920’s balance as high as ofpossible, they traditional thinking. They put very little a common clause in loan gave in loan agreements gaveagreements banks adjustable rate interest-only mortgages, clause money down, they keep their mortgage the right to demand full repayment of banks the right to demand full repayment and most importantly they integrate their balance as high as possible, they choose theof loan any time. Since thisSince was like theatloan at any time. this was like mortgagerate intointerest-only their overallmortgages, financial plan to asking adjustable for the moon and the stars, no one asking for the moon and the stars, no one continually increasethey theirintegrate wealth. This and most importantly their is how worried about it. When the stock market worried about it. When the stock market mortgage intoricher. their overall financial plan the rich get crashed on October 29, 1929 millions of crashed October 29,money, 1929much millions of to continually increase their wealth. This is investors loston huge sums of Thethe game is the same, but while most of itinvestors how richboard get richer. lost huge sums of money, on margin. Back then, you could buy much Americans are playing checkers, the affluent $10ofof itstock for a $1. Since value on margin. Back the then, youofcould buy The board is theThe same, but while stocks dropped, few investors wanted aregame playing chess. good news is the the$10 of stock for a $1. Since the value of the most Americans are playing checkers, the to sell, so they had to go to the bank strategies used by the wealthy work for the stocks dropped, few investors wanted to sell, affluent are playing chess. The good news and take out cash to cover their margin rest of America as well. Any home-owner can so they had to go to the bank and take out is the strategies used by the wealthy work call. It didn’t take long for the banks to implement the strategies of the wealthy to tocash coverand their margin It didn’t take for the rest of America as well. Any homeruncash out of start callingcall. loans increase net worth. owner cantheir implement the strategies of the theAmericans banks to who run were out of cash and duelong fromfor good wealthy to increase their net worth. faithfully makingloans their mortgage start calling due from payments good Americans RicEdelman, Edelman,one oneofofthe thetop topfinancial financial planners every month. However, there wasn’t any Ric who were faithfully making their mortgage in the country and aand New York York Times Best demand to buy these homes, so prices planners in the country a New payments every month. However, there Times Best Selling author, summarizes in The continued to drop. To cover the margin Selling author, summarizes in this book wasn’t any demand to buy these homes, so this book The Truth About Truth About Money, “TooMoney, often,“Too people buy calls, brokers were forced to sell stocks prices continued to drop. To cover the margin often, people buy homes in a vacuum, homes in a vacuum, without considering how and once again there wasn’t a market calls, brokers were forced to sell stocks and without considering how that purchase is that purchase is going to affect other aspects for stocks so the prices kept dropping. going to affect other aspects of their lives. once again thereDepression wasn’t a market for stocks Ultimately, the Great saw the of their lives. This can beand a big mistake, and stock market fall more than 75% from its This can be a big mistake, therefore so the prices kept dropping. Ultimately, the therefore you mustthat recognize owning a 1929 highs. you must recognize owning athat home Great Depression saw the stock market fall holds important implications for the homevery holds very important implications for more than 75% from its 1929 highs. rest your plan. Although a theofrest of financial your financial plan. Although a fine goal, owning a home is not the

fine goal, owning a home is not the ultimate

More than half the nation’s banks failed and millions of homeowners, unable to raise the


Money, Ric tells the story of two brothers,

More than half the nation’s banks failed

cashand they needed to payoff their loans,tolost millions of homeowners, unable theirraise homes. Out of thisneeded the American Mantra the cash they to payoff their loans, lost their homes. Out of this was born: Always own your home outright. thecarry American Mantra was born: Always Never a mortgage. own your home outright. Never carry a

Themortgage. reasoning behind America’s new mantra The reasoning behind ifAmerica’s new fell was really quite simple: the economy mantra was really quite simple: if the to pieces, at least you still had your home economy fell to pieces, at least you still andhad the your bankhome couldn’t take it away from you. and the bank couldn’t take Maybe youfrom couldn’t put food oncouldn’t the table it away you. Maybe you putor payfood youronbills, but your home was secure. the table or pay your bills, but your secure. Since Great Since thehome Greatwas Depression lawsthe have been Depression laws have been introduced introduced that make it illegal for banks to illegal for banks to call your call that yourmake loanitdue. The bank can no longer loan due. The bank can no longer call you call up youand upsay, and“We’re say, “We’re running a little running a little short on short on cash and need you to pay your cash and need you to pay off youroff loan in loanthe in next the next thirtythirty days.”days.” Additionally, the Fed is now quick to

Additionally, the into Fed the is now quick to infuse infuse money system if there is money thebanks, systemasifwethere run on a runinto on the saw is in a 1987 Y2K. the in FDIC wasand created the and banks, asAlso, we saw 1987 Y2K. to Also, insure banks. Still, it’s no wonder the fear the FDIC was created to insure banks. Still, of losing their home became instilled in it’s no wonder the fear of losing their home the hearts and minds of the American became instilled in the hearts and minds people, and they quickly grew to fear of the and and they60’s quickly theirAmerican mortgage.people, In the 1950’s grewfamilies to fearwould theirthrow mortgage. In the 1950’s mortgage burning to celebrate paying off their andparties 60’s families would throw mortgage home. And so, because of this fear of their burning parties to celebrate paying off their mortgage, for nearly 75 years most home. And so, because of this fear of their people have overlooked the opportunities mortgage, for nearly 75 years most people their mortgage provides to build financial havesecurity overlooked the opportunities their mortgage provides to build financial security.

Why people hate their mortgage andtheir whymortgage you Why people hate andshouldn’t why you shouldn’t Many people hate their mortgage because

Many people hate the their because they know over lifemortgage of a 30 year loan, theythey know lifeinofinterest a 30 than year the loan, will over spendthe more cost them in the place.than To save theyhouse will spend more in first interest the money becomes veryfirst tempting house costit them in the place.toTomake save a bigger down payment, or make extra money it becomes very tempting to make principal payments. Unfortunately, saving a bigger down payment, or make extra money is not the same as making money. principal payments. Or, put another way,Unfortunately, paying off debtsaving is money is not the as same as makingassets. money.ByOr, not the same accumulating mortgage put tackling anotherthe way, paying pay-off off debtfirst, is and not the the same as accumulating assets. By tackling the mortgage pay-off first, and the savings goal second, many fail to consider the important role a mortgage plays in our savings effort.

Common Home Equity Misconceptions Many Americans believe the following statements to be true, but in reality they are myths, or misconceptions:

Your home equity is a prudent investment.

FALSE Extra principal payments on your mortgage saves you money.

FALSE Mortgage interest should be eliminated as soon as possible.

FALSE Substantial equity in your home enhances your net worth.

FALSE Home Equity has a rate of return.

FALSE savings goal many failistoaconsider Every dollar wesecond, give the bank dollar we the important role a mortgage plays in our did not invest. While paying off the mortgage savings effort. Every dollar we give the saves us interest, it denies us the opportunity bank is a dollar we did not invest. While to earn interest with that money. paying off the mortgage saves us interest, it denies us the opportunity to earn interest with that money.

A tale of two brothers

Ric Edelman has educated his clients for A tale of two brothers years on the benefits of integrating their mortgage intohas their overallhisfinancial Ric Edelman educated clients plan. Inforhisyears book, New Rules of Money, Ric on The the benefits of integrating their overall financial tells themortgage story of into two their brothers, each of whom plan. In his book, The New Rules of secures a mortgage to buy a $200,000 home. Each brother earns $70,000 a year and has $40,000 in savings. The first brother, Brother A, believes in the old way of paying

off a mortgage, which aismortgage as soon astopossible. each of whom secures Brother A bites the bulletEach and brother secures a fifteenbuy a $200,000 home. earns $70,000 a year and has year mortgage at 6.38% APR $40,000 and shells out in savings. The A, down all $40,000 offirst hisbrother, savingsBrother as a 20% believes in the old way of paying off payment, leaving him zero dollars ato invest. mortgage, which is as soon as possible. This leaves him with a monthly payment of Brother A bites the bullet and secures a $1,383. Since he hasat 6.38% a combined fifteen-year mortgage APR andfederal and income taxofrate 32%, as he is left shellsstate out all $40,000 his of savings a 20%an down payment, leaving zero cost with average monthly nethim after-tax dollars to invest. with a of $1,227. Also, This in anleaves efforthim to eliminate his monthly payment of $1,383. Since he has mortgage sooner, Brother A sends an extra a combined federal and state income tax $100 to his lender every month. Brother rate of 32%, he is left with an average B, in contrast, subscribes the new way of monthly net after-tax cost ofto$1,227. Also, mortgage planning, choosing instead to in an effort to eliminate his mortgage carry a big, long-term He secures sooner, Brother A sendsmortgage. an extra $100 to his lender every month. a 30-year, interest-only loan at 7.42% APR. He outlays a small 5% down payment of Brother B, in contrast, subscribes $10,000 and invests the remaining $30,000 to the new way of mortgage planning, in a safe,instead moneymaking account. His choosing to carry a side big, long-term monthly payment is $1,175, 100% of which mortgage. He secures a 30-year, interestis taxloan deductible 15 ayears, and only at 7.42% over APR.the He first outlays small 5% down payment of $10,000 and him 64% over the life of the loan, leaving invests the remaining $30,000 in a safe, a monthly net after-tax cost of $799. Every moneymaking side account. His monthly month he adds $100 to his investments (the payment is $1,175, 100% of which is tax same $100 Brother A sent to his lender), plus deductible over the first 15 years, and 64% the he’s from his lower over$428 the life ofsaved the loan, leaving him mortgage a payment. investment earns an monthly netHis after-tax cost ofaccount $799. Every month $100 to his investments 8% rateheofadds return. (the same $100 Brother A sent to his

Which brother madehe’s thesaved rightfrom decision? lender), plus the $428 his lower mortgage payment. His investment The answer can be found by looking into account earns anjust 8% rate return. the future. After five of years Brother A has received $14,216 in tax savings, however he Which brother made the right decision? made zero dollars in savings and investments. The answer can be found by looking into Brother B,After on the hand, has received the future. justother five years $22,557 savings$14,216 and hisin savings and Brother A in hastax received tax savings, however he made zero dollars in investment account has grown to $83,513. savings and investments. Brother B, on thelose Now, what if both brothers suddenly other hand, has received $22,557 in tax their jobs? The story here turns rather bleak savings and his savings and investment for Brother A. Without any money in savings, account has grown to $83,513. Now, what he hasbrothers no way tosuddenly get through the crisis. if both lose their jobs? Even though hasturns $74,320 of equity in his The storyhe here rather bleak for Brotherhe A. can’t Without money in savings, home, getany a loan because he doesn’t he hasa no to get have job.way With no through job andthe no crisis. savings, he Even though can’t make his monthly payments and has no choice but to sell his home in order to avoid foreclosure. Unfortunately, at this point it’s a fire sale so he must sell at a discount, and

3


A Tale of Two Brothers Adapted from the book, The New Rules of Money

Our story begins with two brothers, each earning $70,000 a year. They each have $40,000 in savings and both are buying $200,0000 homes.

Brother “A” believes in “The Old Way” – paying off the mortgage as soon as possible

Brother “B” believes in “The New Way” –carrying a big, long mortgage

15-year mortgage at 6.38% APR

30-year mortgage at 7.42% APR

$40,000 Big Down Payment

$10,000 Big Down Payment

$0 left to invest

$30,000 left to invest

$1,383 Monthly Payment

$1,175 Monthly Payment

(56% is tax deductible first year/33% average)

(100% is tax deductible first 15 yeas/64% average)

$1,227 Monthly Net After-Tax Cost

$799 Monthly Net After-Tax Cost

Sends $100 monthly to lender in effort to eliminate mortgage sooner

Adds $100 monthly to investments, plus $428 saved from lower mortgage payment where account earns 8% rate of return

Results after 5 Years Received $14,216 in tax savings

Received $22,557 in tax savings

has $0 in savings and investments

has $83,513 in savings and investments

What if both brothers suddenly lost their jobs? Has no savings to get him through crisis

Has $83,513, in savings to tide him over

Can’t get a loan – even though he has $74,320 more in equity than his brother – because he has no job

Doesn’t need a loan

Must sell his home or face foreclosure because he can’t make payments

Can easily make his mortgage payments even if he’s unemployed for years

At this point – it’s a fire sale – he must sell at a discount and pay real estate commissions (6-7 %)

has no reason to panic since he’s still in control – remember... cash is KING!

then pay real estate commissions. Brother B, while not particularly happy at the prospects of searching for a new job, is not worried becauseofheequity has $83,513 in savings to he has $74,320 in his home, tide him get over.a loan He doesn’t need a loan and can he can’t because he doesn’t easily his monthly payments, even if he have amake job. With no job and no savings, can’t make his payments and isheunemployed formonthly years. He has no reason to has no choice but to sell his home in panic, as he is still in control. Remember… order to avoid foreclosure. Unfortunately, at this is point it’s a fire sale so he must sell Cash King! at a discount, and then pay real estate commissions. Now, let’s say neither brother lost his

job. We’ll check in on them after fifteen years have Brother B, whilethey not particularly passed since purchasedhappy their athomes the prospects of searching for a new job, and evaluate the results of their financing is not worried because he has $83,513 in strategies. Brother A He hasdoesn’t now need received savings to tide him over. $25,080 taxeasily savings, $30,421 in a loan andincan makehehishas monthly payments, even if he savings and investments (once his home is unemployed years.saving He hasthe noequivalent was paid off hefor started reason to panic, as he is still in control. of his mortgage payment each month), and Remember… owns his home outright. Not too bad, right? Cash is King!

Now let’s check on his Brother. Brother B Now, let’s say neither brother lost his job. has received $67,670 in tax savings and has We’ll check in on them after fifteen years $282,019 in since savings investments. have passed theyand purchased their If he chooses to,evaluate he can the payresults off the remaining homes and of their financing strategies. A has now mortgage balance ofBrother $190,000 and still have received left $25,080 in savings, tax savings, has $92,019 over in freehe and clear. $30,421 in savings and investments (once

Results After 15 Years Received $25,080 in tax savings

Received $67,670 in tax savings

Has $30,421 in savings and investments

Has $282,019 in savings and investments

Owns home outright

Remaining mortgage balance is $190,000 – and he has enough savings to pay it off and still have $92,019 left over, free and clear

Results After 30 Years Received $25,080 in tax savings

Received $107,826 in tax savings

Has $613,858 in savings and investments

Has $1,115,425 in savings and investments

Owns home outright

Owns home outright – so starts fresh and enjoys the same benefits once again

his homelet’s was assume paid off he started saving Finally, that rather than pay the equivalent of his mortgage payment off his mortgage at fifteen years, Brother B each month), and owns his home outright. decides to ride out the whole thirty years of the Not too bad, right? loan’s life. While Brother A has still received only inon taxhissavings, savings Now $25,080 let’s check Brother.his Brother B and investments have grown to $613,858, has received $67,670 in tax savings and and hasstill $282,019 investments. he owns inhissavings homeand outright. Brother B, If he chooses to, he can pay off the on the other hand, has received a whopping remaining mortgage balancehas of $190,000 $107,826 in tax savings, accumulated and still have $92,019 left over in savings, an incredible $1,115,425 in savings and free and clear. investments, and also owns his home outright. Heassume can start Finally, let’s thatover ratherfresh than and pay enjoy off his mortgage fifteenagain. years,Unfortunately, Brother the same benefitsat once B decides to ride out the whole thirtythe same the majority of Americans follow yearsas of Brother the loan’s A they path A,life. as While it’s theBrother only path has still received only $25,080 in tax know. Once the path of Brother B is revealed savings, his savings and investments to them, a paradigm shifting epiphany often have grown to $613,858, and he still occurs as they Brother B’sB,path enables owns his homerealize outright. Brother on the homeowners to received pay their ahomes off sooner (if other hand, has whopping they choose to), while significantly increasing


Are you still doing this? “Here is an extra $100 principal payment Mr. Banker. Don’t pay me any interest on it. If I need it back, I’ll pay you fees, borrow it back on your terms, and prove to you that I qualify.”

Money you give the bank is money you’ll never see again unless you refinance or sell.

$107,826 in tax savings, has accumulated

Many Americans believe the best way to

occurs as they realize Brother B’s path homeowners to pay their homes In enables 2003, Doug Andrew, a top financial planneroff sooner (if they choose to), while significantly from Utah, was the first to clearly articulate increasing their net worth and maintaining the strategy the wealthy have been using the added benefits of liquidity and safety the forentire decades in his book, Missed Fortune. The way.

between a 15-year loan and a 30-year loan, as well as the tax savings a safe side Cram Investment Groupintoteaches an investmentseminar account for earning conservative educational the apublic based rate of you willFortune have enough to pay largely onreturn, the Missed concepts. In your home off in 13½ years (or in 15 years the seminar, we break down the four key with $25,000 to spare!). Chapter one in benefits of integrating your mortgage into Missed Fortune talks about the $25,000 your financial plan (increased liquidity, safety, mistake made by millions of Americans who ratechoose of return, tax deductions) theand fifteen-year loan. in order to

Certified Financial Planners) contained

$107,826 in tax savings, has accumulated their net worth and maintaining the added year loan and a 30-year loan, as well as the tax 4-5%, the chances are pretty good that you the first academic study undertaken on pay off a home early is to pay extra principal an incredible $1,115,425 in savings and intomortgage. a safe side investment account can the benefits of liquidity entire way. savings earn 5% on your money. Interest rates on your Similarly, many finance investments, and and also safety owns the his home question of 15-year versus 30-year a conservative rate ofloan return, youyou will are relative. In the 1980’s, moneythe was30-year costingloan mortgages. They concluded professors think a 15-year saves outright. He can start over fresh and enjoy earning have enough to pay your home off in 13½ 15%, but individuals could still earn 15% on is better. Based on the same logic, wouldn’t money by reducing the interest you pay. the same benefits once again.home Unfortunately, Successfully managing years (or in 15 yearsAndrew with $25,000 to spare!). their money. Due to the tax deductibility of However, Doug points out in his the majority of Americans follow the same equity increase liquidity, an interest-only loan be better than an book, one Missed Fortune, that this thinking is path asto Brother A, as it’s the only path they Chapter in Missed Fortune talks about mortgage interest and compounding returns, If mortgage money If you do the made math, you find if youof youamortizing know. Once of Brother safety, rate the of path return, and B is revealed theflawed. $25,000 mistake by millions can borrowloan? at a higher rate and investcost it atyou 4-5%, the chances are pretty good that you set asidewho thechoose monthly payment difference to them, a paradigm shifting epiphany often Americans the fifteen-year loan. a lower rate and still make a significant profit. tax deductions

book is based on the concepts of successfully managing home equity to increase liquidity, Successfully managing home safety, rate of return, and tax deductions. equity toreaders increase Doug educates to viewliquidity, their mortgage ratethrough of return, and andsafety, home equity a different lens, the same used by the affluent. He shows taxlens deductions how relatively minor changes in home equity In 2003, Doug Andrew, a top financial perception and positioning can produce planner from Utah, was the first to clearly monumental long-term effects in financial articulate the strategy the wealthy have security. been using for decades in his book, Missed

Fortune. The book is based on the concepts

Fortune. The book is based on the concepts Many Americans believe the best way to of successfully managing home equity to payincrease off a home early is to pay extra principal liquidity, safety, rate of return, and ontax your mortgage. Similarly, many finance deductions. Doug educates readers professors think a 15-year loan saves to view their mortgage and home equityyou money by a reducing the the interest through different lens, sameyou lens pay. used However, Doug Andrew pointshow outrelatively in his book, by the affluent. He shows minorFortune, changesthat in home equity perception Missed this thinking is flawed. If and positioning can produce monumental you do the math, you find if you set aside the long-term effectsdifference in financialbetween security. a 15monthly payment

can earn 5% on your money. Interest rates are relative. In the 1980’s, money was costing 15%, but individuals could still earn 15% on their money. Due to the tax deductibility of mortgage interest and compounding returns, can cash borrow at a higher and invest By you having available ftor rate emergencies it at a lower rate and still make a and investment opportunities, mostsignificant homeprofit.

Large equity in your home can be a big disadvantage

owners are better off than if their equity is tied up in their residence. Large, idle equity, also look at each one in more detail Large equity your home called ‘having all yourineggs in one basket,’ Cram Investment Group teaches an Oureducational goal is to help clients conserve their home can be a big disadvantage can be risky if the homeowner suddenly seminar for the public based equity, not consume it. Fortune We are concepts. one of theIn needs cash. While employed and in excellent largely on the Missed By having cash available ftor emergencies fewthe financial planning firms who health, borrowing on a home is easy, but most four key seminar, we break down theencourage and investment opportunities, most homeclients to secure debt in order become debt benefits of integrating yourtomortgage into people, especially owners are betterretirees, off than if unexpectedly their equity financial plan (increased liquidity, safety, need freeyour sooner. when they residence. are sick, unemployed is cash tied up in their Large, idle or rate of return, and tax deductions) in order to haveequity, insufficient income. Obtaining home also called ‘having all your aeggs in In look Aprilat 1998, Thein more Journal of Financial each one detail basket,’ be risky if the loanone under thesecan circumstances canhomeowner be either Planning (published by the Institute of suddenly cash. While employed impossible orneeds very expensive. Our goalFinancial is to help clients conserve their Certified Planners) contained and in excellent health, borrowing on a not consume it. We are one thehome first equity, academic study undertaken on Howhome manyisofeasy, us feel go toespecially the bank butwhen most we people, the few financial planning firms who theof question of 15-year versus 30-year we almost retirees,need unexpectedly need cash when to prove we don’t need thethey encourage clients to secure in order are sick, unemployed or have insufficient mortgages. They concluded thedebt 30-year loanto money before they’ll loan it to us? The bank become debt free sooner. income. Obtaining a home loan under these is better. Based on the same logic, wouldn’t wants to know we have the ability to repay circumstances can be either impossible an Ininterest-only loan be better than an the loan. You can imagine how a conversationor April 1998, The Journal of Financial very expensive. amortizing If mortgage Planningloan? (published by the money Institutecost of you might go with your banker: “I brought up


your loan application up to the board this There are actually three primary reasons:

How many of us feel when we go to the morning and I explained to them you’re going bank we almost need to prove we don’t through some hard financial times, you’re need the money before they’ll loan it to us? unemployed, your credit is not so good and The bank wants to know we have the ability maybe lendcan youimagine some cash to repaythey the could loan. You how to a get through thesemight rough times. Their response conversation go with your banker: “I was... ‘Fat chance!’ brought up your loan application up to the board this morning and I explained to them What many is that even you’re goingpeople throughdon’t somerealize hard financial if they’ve consistently been making double times, you’re unemployed, your credit is not so good and maybe they could mortgage payments for five yearslend in ayou row, the some cashhas to get rough times. bank still no through leniency.these If suddenly they Their response was... ‘Fat chance!’ experience a financial setback, the bank will

not care. They can go to the bank and plead,

What many people don’t realize is that even “I never thought in a million years this would if they’ve consistently been making double happen to me, but it did. I’ve been paying my mortgage payments for five years in a row, mortgage in has advance for years, how about if the bank still no leniency. If suddenly I justexperience coast on my mortgage payments for a they a financial setback, the bank fewnot months?” Theycan get go thetosame answer every will care. They the bank and plead, never thought in ajust million time... “I‘Fat chance!’ Banks don’tyears workthis that would happen to me, but it did. I’ve been way. Regardless of how much you’ve paid your paying my down mortgage in advance for payments years, mortgage or how many extra how about if I just coast on my mortgage you’ve made, next month’s payment is still payments for a few months?” They get the due in its entirety no matter what. same answer every time... ‘Fat chance!’ Banks just don’t work that way. Regardless of how much you’ve paid your mortgage down or how many extra payments you’ve made, next month’s payment is still due in its entirety no matter what.

mortgage payment, or have an additional financial times, would your rather have $25,000 of equity trapped in your home? $25,000 of cash to help you make your Almost every person who has ever lost their mortgage payment, or have an additional home to foreclosure would have been better $25,000 of equity trapped in your home? off if they hadperson their who equity from Almost every hasseparated ever lost their 1. Liquidity home in a liquid,would safe, conservative side home to foreclosure have been better These three elements are also commonly their 2. Safety fund that could be used to make mortgage used asofthe test of a prudent investment. off if they had their equity separated from 3. Rate return their home in a liquid, conservative side during their safe, time of need. When evaluating a potential investment, payments fund that could be used to make mortgage These three elements experienced investors are will also ask commonly the following The importance of liquidity became all too payments during their time of need. used as the test of a prudent investment. three questions: clear when the stock market crashed in cash position. Why in the world would you want to have the1.equity removed from your Liquidity home? There are 2. actually Safetythree primary reasons: 3. Rate of return

When evaluating a potential investment, experienced1. investors will ask the following How liquid is it? three questions: (Can I get my money back when I want it?)

2. How 1. How liquid issafe it? is it?

(Can I get my back when I want it?) (Is itmoney guaranteed or insured?)

3. Whatsafe rate ofisreturn 2. How it? can I expect? (Is it guaranteed or insured?)

Home equity fails all three tests of a prudent investment. Let’s examine each can of these core 3. What rate of return elements in more detail to better understand I expect? why home equity fails the tests of a prudent Home equity and, fails allmore three tests of a prudent investment, importantly, why investment. Let’s examinebyeach of these core home-owners benefit separating the elements in more detail to better understand equity from their home. why home equity fails the tests of a prudent investment, and, more importantly, why home-owners benefit by separating the equity from their home.

The importance became too October of 1987.of Ifliquidity someone had alladvised clear when the stock market crashed in you to sell your stocks and convert to cash, October of 1987. If someone had advised they would have been a hero. Or, if you had you to sell your stocks and convert to cash, enough liquidity you could have weathered they would have been a hero. Or, if you had the storm. Those with other liquid assets were enough liquidity you could have weathered able to remain invested. Theyliquid wereassets rewarded the storm. Those with other aswere theable market rebounded to remain invested.and Theyrecovered were fully withinas90the days. However, those and without rewarded market rebounded recovered fully withinto90 However, liquidity were forced selldays. while the market those without liquidity were forcedsignificant to sell was down, causing them to accept while the market was down, causing them losses. In Missed Fortune, Doug Andrew tells to accept significant losses. In Missed the story of a young couple who learned what Fortune, Doug Andrew tells the story of a he calls “The $150,000 Lesson on Liquidity”. young couple who learned what he calls In“The 1978 this couple built a beautifulIn home $150,000 Lesson on Liquidity”. that be featured Better home Homesthat and 1978would this couple built a in beautiful Gardens. couple’s home appreciated would be The featured in Better Homes and The by couple’s inGardens. value, and, 1982,home it wasappreciated appraised for in value, by 1982,They it was appraised for just underand, $300,000. had accumulated under $300,000. They had accumulated ajust significant amount of equity, not because a significant amount of equity, not because they had been making extra payments on they had been making extra payments on the property, but because market conditions the property, but because market conditions improved improvedover overthat thatfour-year four-yearperiod. period.

Why separate equity from your home?

Separating equity to increase liquidity

In the book, Missed Fortune, Doug Andrew suggests people strongly Why from equity considerseparate separatingequity as much your as theyhome? possibly can from their house, and place it overMissed in a cash position. in the In the book, Fortune, DougWhy Andrew world would youstrongly want to have the equity suggests people consider separating as much equity as they possibly removed from your home?

What is the biggest secret Separating equity toin real estate? Your mortgageliquidity is a loan against your income, increase not a loan against the value of your house. What is the biggest secret in real estate? Your Without an income, in many cases you cannot mortgage is a loan against your income, not a get a loan. If you suddenly experienced loan against the value of your house. Without This couple thought they had the world by difficult financial your get rather an income, in manytimes, caseswould you cannot a This couple thought they had the world tail. They had a home valued at $300,000 have of cashexperienced to help you make loan. $25,000 If you suddenly difficultyour the by the tail. They had a home valued at

can from their house, and place it over in a


“It’s better to have access to the equity or value of your home and not need it, than to need it and not be able to get at it.”

during which wasbalance forced to who got stucktime withthe the lender deficiency of $30,000 on their credit report? The original pay the first mortgage and also accrued an owners, of$30,000 course! of interest and penalties. additional By the time the home finally sold, less the They hadhad thethe misconception that thethe equity in This couple not only had a foreclosure They misconception that $30,000 in accrued indebtedness, guess equity in their home had a rate of return when, in appear on their credit report for seven years, their home had a rate of return when, in fact, it who got stuck with the deficiency balance of fact,was it was a number a sheet of paper. the report also showed a deficiency balance justjust a number on aonsheet of paper. $30,000 on theironcredit report? owing $30,000 a home they The had original lost owners, of course! Then, nearly one year a series of unexpected events reduced Then, a series of unexpected events reduced their earlier. In a time of financial setback they lost income to almost nothingnothing for nine months. their income to almost for nine This couple not only had a foreclosure appear They of their most valuable assets due to a couldn’t borrow money to keep their months. They couldn’t borrow money to keep onone their credit report for seven years, the lack of liquidity. If they had separated their mortgage payments current because without their mortgage payments current because report also showed a deficiency balance owing an income they did not have the ability to $150,000 in home equity and repositioned without an income they did not have the ability $30,000 repay. Within six months they had sold two on a side homeaccount, they had lostwould nearlyhave one it into a safe they to repay. Within six months they had sold two year other easily been able to make their mortgage properties to bring their mortgage out of earlier. In a time of financial setback they other properties to bring theirthat mortgage payments and prevented this series delinquency. They soon realized in orderout to lost one of their most valuable assetsofdue to of delinquency. They soon they realized that in a events. protect their $150,000 of equity would have lack of liquidity. If they had separated their to sell At this point in the story, Doug admits the their home. As Murphy’s Lawofwould order to protect their $150,000 equityhave they $150,000 in home equity and repositioned it, the couple was really he and his wife, would have to sell their home. As Murphy’s it young into a safe side account, they would have Sharee. Despite objections from his editor, previously strong real market turned Law would have it, estate the previously strongsoft. real easily able make their mortgage Dougbeen insisted the to story remain in the book estate market turned soft. payments and prevented this series of events. $300,000 with first and second mortgages owingowing only with first and second mortgages only$150,000. $150,000.They Theyhad had“made” “made”$150,000 $150,000ininfour four short years. short years.

Although they reduced their asking price several times – from $295,000 down their to $195,000 they Although they reduced asking –price could not find a buyer. Sadly, they gave up the several times – from $295,000 down to home in foreclosure to the mortgage lender. $195,000 – they could not find a buyer. Sadly, Sometimes sad stories only get sadder. The two they gave up the home in foreclosure to the mortgages on the property were in the amounts mortgageand lender. Sometimes sadThe stories of $125,000 $25,000, respectively. only mortgage get sadder. The two mortgages on the second holder outbid the first one property were in thefeeling amounts $125,000 at the ensuing auction, that, of much like theand original owners, itrespectively. was in a goodThe position. $25,000, second Knowing that the house had been appraised mortgage holder outbid the first one at for the $300,000, and the obligation owing was only ensuing auction, feeling that, much like the $150,000, it thought it could turn around and original owners, it was in a good position. sell the property to cover the investment. It took Knowing that the house had been appraised nine long months to sell, during which time the for $300,000, and the obligation owing lender was forced to pay the first mortgage and only $150,000, it thought turn alsowas accrued an additional $30,000 itofcould interest andBysell coversold, the andaround penalties. the the timeproperty the hometofinally It in took nine long months toguess sell, lessinvestment. the $30,000 accrued indebtedness,

because he wanted his readers to know he understands first hand the importance of Atpositioning this pointassets in theinstory, Doug admits the financial instruments young couple liquidity was really and ofhisan wife, that maintain in theheevent objections from his access editor, Sharee. Despite emergency. If Doug and Sharee had Doug insisted storythey remain inhave the book to their home’sthe equity, could used it to weather the because he wanted his readers to know he financial storm they the could get back of understands firstuntilhand importance on their feet. Doug learned from his own positioning assets in financial instruments experience the importance of maintaining that maintain liquidity in the event of an flexibility in order to ride out market lows emergency. If Doug and Sharee had access and take advantage of market highs. And, tomost theirimportantly, home’s equity, they could useda he learned neverhave to allow it significant to weatheramount the financial storm until theyin of equity to accumulate could get back on their feet. Doug learned his property. Home is not the same cash in theof from hisequity own experience the as importance bank; only cash in the bank is thetosame maintaining flexibility in order ride as out cash in the bank. Being house rich and cash market lows and take advantage of market poor is a dangerous position to be in. It is

highs. And, mostaccess importantly, he learned better to have to the equity or value of your home and not need it, than to need it and never to allow a significant amount of equity not be able to get at it. Keeping home equity to accumulate in his property. safe is really a matter of positioning yourself to

act instead of not reactthe to same marketasconditions over Home equity is cash in the which you have no control. bank; only cash in the bank is the same as cash in the bank. Being house rich and cash Separating equity poor is a dangerous positiontoto be in. It is better to have access to theofequity or value of increase safety principal your home and not need it, than to need it and The Seattle Times, in an article published notinbeMarch able 2004, to get reported, at it. Keeping home equity “Remember that safehousing is reallyprices a matter of positioning can and do level off.yourself to They act instead of react to market conditions sometimes decline – witness Southern over which you nomore control. California justhave a little than a decade

ago, when prices took a 20 percent to 30 percent corrective jolt downward.” Real estate equity is no safer than any other investment whose value is determined by an external market over which we personally have no Thecontrol. SeattleIn Times, fact, dueintoan thearticle hiddenpublished “risks of life,” real estate equity is not nearly as safe as in March 2004, reported, “Remember thatmany other conservative housing prices can andinvestments do level off.and assets. A home that is either mortgaged to the hilt They sometimes decline – witness Southern or owned totally free and clear provides the greatest safety for the homeowner. California just a little more than a decade ago,

Separating equity to increase safety of principal

when prices took a 20 percent to 30 percent corrective jolt downward.” Real estate equity is no safer than any other investment whose value is determined by an external market “Home equity over which we personally have is nonot control. In fact,the due same to the hidden “risks of in life,”the real as cash estate bank. equity is not nearly as safe as many Only cash in the other conservative investments and assets. bank is the same as A home that is either mortgaged to the hilt cashfree inand theclearbank.” or owned totally provides the greatest safety for the homeowner.


the Enron Corporation collapsed a few years ago, and thousands lost their jobs and homes, again in Houston, Texas. What would happen in the Seattle area if Microsoft or Boeing had major lay-offs? Money you give the bank is money you’ll never see again unless you Americans typically believe home equity is refinance or sell. When the people in Houston a very safe investment. In fact, according to pleaded, “Mr. Banker, I’ve been making extra a recent study, 67% of Americans have more mortgage payments for years. I’m well ahead of their net worth in home equity than in all of schedule. Will let you let me coast for a other investments combined. However, if 100 while?” The bank replied, “Fat Chance!” financial planners looked at a client portfolio that was 67% weighted in a single investment, 99 out of 100 of them would immediately To reduce the risk of foreclosure recommend the client diversify to reduce during unforeseen set-backs, their risk and increase safety of principal. keep your mortgage balance as Holding large amounts of home equity puts the homeowner at unnecessary risk. This risk high as possible could be greatly reduced by diversifying their Is your home really safe? Unfortunately, home equity into other investments. many home buyers have the misconception An example of the necessity of keeping your that paying down their mortgage quickly home’s equity safely separated from your is the best method of reducing the risk property can be can be found in Houston, of foreclosure on their homes. However, Texas. When oil prices fell to all time lows in reality, the exact opposite is true. As in the early 1980’s the city of Houston was homeowners pay down their mortgage, hit hard. Thousands of workers were laid off they are unknowingly transferring the risk and ultimately forced to sell their homes. from the bank to themselves. When the With a glut of homes on the market, housing mortgage balance is high, the bank carries prices plummeted. Unfortunately, there the most risk. When the mortgage balance were far too many sellers and far too few is low, the homeowner bears the risk. With a buyers. Homeowners were unable to sell and low mortgage balance the bank is in a great unable to make their mortgage payments. position, as they stand to make a nice profit As a result, 16,000 homes were foreclosed. if the homeowner defaults. In addition to Did these 16,000 families suddenly become assuming unnecessary risk, many people who bad people? No, they just couldn’t make their scrape up every bit of extra money they can to mortgage payments. Just prior to this series apply against principal often find themselves of events many of these people were making with no liquidity. When tough times come, extra principal payments. Unfortunately, they they find themselves scrambling to make could not coast on those extra payments, and their mortgage payments.

“Home equity is not the same as cash in the bank. Only cash in the bank is the same as cash in the bank.”

with so many houses on the market for sale, Assume you’re a mortgage banker looking some people literally had to walk away from at your portfolio, and you have 100 loans their home. that are delinquent. All of the loans are The equity these people had worked so hard for homes valued at $300,000. Some of to build up was lost completely. They learned the loan balances are $150,000 and some the hard way that home equity is fragile, and are $250,000. Suddenly, there is a glut in certainly not as safe as they once thought. the market and the homes are now worth Could this happen today? Just look at when $200,000. Which homes do you as the banker foreclose on FIRST? The ones owing the least

amount of money, of course. After all, as a banker you’d make money taking back those homes, however you’d lose money trying to sell a home for $200,000 that still owed $250,000 on it. Banks have been known to call delinquent homeowners with high mortgage balances and offer assistance, “We understand you are going through some tough times, is there anything we can do to help you? We really want you to be able to keep your home.” The last thing they want to do is take back a home that they will lose money reselling. It’s interesting to note, during the Great Depression, the Hilton chain of hotels was deeply affected by the stock market crash and couldn’t make their loan payments. What saved them from financial ruin? They were so leveraged, in other words they owed so much more on their property than it was worth, that the banks couldn’t afford to bother wasting their time foreclosing on it. The Hiltons understood the value of keeping high mortgage balances thereby keeping the risk on the banks. The Houston homeowners would have been better off if they had removed a large portion of their equity and put it in a safe and liquid side fund, accessible in a time of need. Ask yourself, if you owned a $400,000 home during an earthquake in California (and you didn’t have earthquake insurance), would you rather have your equity trapped in the house or in a liquid, safe side fund? If it were trapped in the home, your equity would be lost along with the house.

Separating equity to increase rate of return What do you think the rate of return on home equity was in Seattle for the last 3 years? What about Portland? Careful, this is a trick question. The truth is, it doesn’t matter where you live or how fast the homes are appreciating, the return on home equity is always the same, ZERO. We have a misconception that because


our home appreciates, or our mortgage balance is going down, thatTherefore, the equity home has a the home’s appreciation. rateequity of return. notintrue. HomeItequity simplyThat’s sits idle the home. does rate of Home return.values Assume you hasnot NOearn rateany of return. fluctuate home worth $100,000 duehave to amarket conditions, not which due toyouthe own freebalance. and clear. If thethe home appreciates mortgage Since equity in the 5%, you own an asset worth $105,000 at home has no relation to the home’s value, the end of the year. it is in no way responsible for the home’s appreciation. Therefore, home equity simply Now, assume you had separated the sits$100,000 idle in theofhome. It does not earn any rate home equity and placed it in of areturn. Assume youside haveaccount a home worth safe, conservative earning $100,000 which you own free and clear. 8%. Your side account would be worthIf the home appreciates ownyear. an asset $108,000 at the5%, endyou of the You worth still own theathome, which appreciated 5% and $105,000 the end of the year. is worth $105,000. By separating the equity

Now, assume a new you asset had which separated the you created was also $100,000 of home and Therefore, placed it in a able to earn a rateequity of return. safe, sidemore account 8%. youconservative earned $8,000 thanearning you would have money werebeleft to sit$108,000 idle Your sideif the account would worth theend home. fair, you have at inthe of To thebeyear. You do still owna the mortgage payment you didn’t have home, which appreciated 5% and is before. worth However, since interest rates are relative, $105,000. By separating the equity you if we are assuming a rate of return of 8%, created a new asset which was also able to we can also assume a strategic interestearn a rate of return. Therefore, you earned only mortgage would be available at 5%. $8,000 more mortgage than youinterest would ishave the Also, since 100%if tax

money were left to sit idle in the home. To be fair, you do have a mortgage deductible, the net cost of thepayment money isyou didn’t have This before. However, since interest only 3.6%. produces a 4.4% positive spread betweenif the costassuming of moneyaand rates are relative, we are rate of the earnings on that money. return of 8%, we can also assume a strategic interest-only mortgage would be available at The story gets much more compelling 5%. Also, since mortgage interest is 100% tax over time, although the mortgage debt deductible, the net cost of the money is only remains constant, through compound 3.6%. This produces a 4.4% positive spread interest, the side account continues to between the cost of money and the earnings grow at a faster pace each year. The onearnings that money. on $100,000 in year 1 are $8,000. Then in year 2, the 8% earnings

The story gets much more compelling over on $108,000 are $8,640. In year 3, the time, although the mortgage debt remains earnings on $116,640 at 8% are $9,331. constant, compound interest, Since thethrough mortgage debt remains the the side account continues to grow at same, the spread between the costaoffaster the pace each year. Theand earnings on $100,000 mortgage money the inearnings year 1 are Then inequity year 2, the 8% on$8,000. the separated continues widen further in the In year 3, earnings on to $108,000 are $8,640. everyatyear. If we$9,331. allow thehomeowner’s earnings on favor $116,640 8% are home equity to remain idle in the home, Since the mortgage debt remains the same, give up the opportunity to put it to thewespread between the cost of the mortgage work and allow it to grow and compound. money and the earnings on the separated equity continues to widen further in the Homeowners would actually be better off homeowner’s favor everybackyards year. If we burying money in their thanallow

home equity to remain idle in the home, we give updown the opportunity to put since it to work and paying their mortgages, money allow itintothe grow and compound. buried backyard is liquid (assuming

you can find it), and its safe (assuming Homeowners would actually neither be better no one else finds it). However, is off burying amoney their backyards than paying earning rate ofinreturn. It’s actually losing down due theirtomortgages, sincepeople moneytoday buried in value inflation. Few the backyard liquid (assuming you can find bury money inisthe back yard or under their mattresses, because theyno have it), and its safe (assuming oneconfidence else finds it). in the banking system. They also However, neither is earning a rateunderstand of return. idle money loses invested It’s actually losingvalue valuewhile due to inflation. Few money grows and compounds. As Albert people today bury money in the back yard or Einstein said, “The most powerful force in under their mattresses, because they have the universe is compound interest.” After all, confidence in the banking system. They also homes were built to house families, not store understand idle money losesto value while cash. Investments were made store cash.

invested money grows and compounds. As Albert from Einstein said, “The mostsuppose powerfulyou force Taken a different angle, in theoffered universe compound interest.” After were an is investment that could never go in value, might down. How not all, up homes werebutbuilt to go house families, much of it would you want? Hopefully store cash. Investments were made tonone. store Yet, this is home equity. It has no rate of cash.

return, so it cannot go up in value, but it could go down in value if the real estate marketyou Taken from a different angle, suppose declines or the homeowner experiences an were offered an investment that could never uninsured loss but (e.g.might an earthquake), disability, go up in value, go down. How much or a foreclosure


5%.we It’sgive whatupmakes millionaires, millionaires! say you had $100,000 of equity in of it would you want? Hopefully none. Yet, this TheLet’s home, the “opportunity” to earn a The power of leverage cost of not borrowing Learn to be your own banker. By using the your home that could be separated. Current

is home equity. It hasano ratecan of return, so it 5 percent return on the money. Let’s be clear, buying home be a great (employment cost vs.isopportunity cost) principles that banks and credit unions use, mortgage interest 5%, so the cost of that cannot go up in value, but it could go down investment. However, the wealthy buy the you can amass a fortune. A bank’s greatest money would be $5,000 per year (100% tax By separating the equity we give it new life. in value if as thelittle realofestate market declines home with their own money as or When homeowners separate equity to assets are its liabilities. You can substantially deductible). Rather than bury the $100,000 We give ourselves the opportunity to put it to possible, leaving the majority ofan their cash in the homeowner experiences uninsured reposition it in a liquid, safe,going side to account, your net worth by optimizing the in the backyard, we are put it toa workenhance and earn something on it. Assuming a other(e.g. investments where it’s liquid, safe, and loss an earthquake), disability, or a mortgage payment is created. Theanmortgage assets that you already have. By being your work, or “employ” it. If I were employer, 28 percent tax bracket, the net employment earning a rate of return. One of the biggest foreclosure own banker you can make an extra $1 Million why would I be willing hire an assistant payment is considered the to Employment Cost. cost for is not 5%, but 3.6%, or $3,600 per year misconceptions homeowners have is that their retirement. $35,000 perdon’t year?understand The expectation is I Whatformany people is when home is the best investment they ever made. am going to be able to grow my business after taxes (mortgage interest is 100% tax If you purchased a home in 1990 for $250,000 we leave equity trapped in our home, we incur deductible). It’s not too difficult to find tax and earn a profit on it. As a business owner, to create an extra and sold it in June of 2003 for $600,000, that the same cost, but we call it a lost Opportunity free How or tax deferred investments earning I believe that by investing in an assistant I Let’s be clear, home the cansame be a Cost. represents a gainbuying of 140%.a During dollars fortaxretirement will earn a return that’s greater than the costmoremillion than 3.6%. Using the benefits of a period, the Dow Jones grew fromthe 2590 to 9188, great investment. However, wealthy of employing that assistant. If we choose to mortgage, you can create your own arbitrage that’s parked in your home doing By repositioning $200,000 into an equity a gainthe of 255%. realityashere is that buy homeThewith little of financing their The money leave the $100,000 of equity in our home, by management borrowing ataccount one rate earning with aand financial advisor nothing could be put to work earning you your was the investment decision own home money as best possible, leaving the we incur almost the same cost. The only you can achieve a net gain of $1 million investment returns at a slightly higher rate. that you ever made. When you purchased the something. majority of their cash in other investments difference is, instead of referring to that cost over thirty years.and Assume separate the It’s what the banks credityou unions do all $250,000 house in 1990, you only put $50,000 as employment cost, it is referred to as an where it’s liquid, safe, and earning a rate of $200,000 homeour equity usingata2% mortgage down. The $50,000 cash investment produced aLet’s say you had $100,000 of equity in the time. They of borrow money and opportunity cost. By leaving the equity in the return. One of the biggest misconceptions with a 5% interest rate. If the $200,000 your home that could be separated. Current profit of $350,000. That is a total return of 600%, then loan it back to us at 5%. It’s what makes home, we give up the “opportunity” to earn a grows at a conservative rate of 6.75% per homeowners have is that home is mortgage far outpacing the measly 255%their earned by the interest is on 5%,thesomoney. the cost of that millionaires, millionaires! Learn to be your 5 percent return it will be worth $1,419,275 in 30 years. the best investment they ever made. If you money stock market. would be $5,000 per year (100% tax ownyear, banker. By using the principles that After deducting the $216,000 in interest purchased a home in 1990 for $250,000 deductible). Ratherthe thanequity bury the $100,000 By separating we give it newinlife. banks and credit unions use, you can amass payments and the $200,000 mortgage, you and sold it inofJune 2003 for $600,000, the backyard, The cost notofborrowing we are going put it to work, or it toa fortune. We give ourselves the to opportunity to put A $1,003,275 bank’s greatest assetsaccount. are itsA still have left in your that represents acost gainvs. of 140%. During cost) the “employ” work it. and on why it. Assuming (employment opportunity If Iearn weresomething an employer, would I a liabilities. net gain of over one million dollars. You can substantially enhance your same period, the Dow Jones grew from be willing 28 percent employment to hiretax anbracket, assistantthe fornet $35,000 per net worth by optimizing the assets that you When homeowners separate equity to reposition not 5%, butis3.6%, $3,600 year 2590 to 9188, a gain of 255%. The reality year?cost Theisexpectation I am or going to beper able Thishave. example simplyyour shows timeyou already By being owna one banker it in a liquid, safe, side account, a mortgage after taxes (mortgage interest is 100% tax here is that financing your home was the to grow my business and earn a profit on it. As repositioning of equity. Imagine how the payment is created. The mortgage payment is an extra $1 Million for retirement. deductible). It’s not too difficult to find tax can make best investment decision that you ever a business numbers grow for individuals that harvest I believe that by investing in considered the Employment Cost. What many free orowner, tax deferred investments earning and reposition their home equity every 5 made. When you purchased the $250,000 an assistant I will earn a return that’s greater people don’t understand is when we leave more than 3.6%. Using the tax benefits years as their home continues to appreciate! house trapped in 1990,inyou putwe$50,000 down. equity ouronly home, incur the same thanofthe cost of employing that assistant. a mortgage, you can create your ownIf This is how the wealthy manage their home The cash investment produced cost,$50,000 but we call it a lost Opportunity Cost. a we choose to leave the $100,000 equity arbitrage by borrowing at oneofrate and in equity to continually increase their net worth. profit of $350,000. That is a total return of our home, earning returns at a slightly weinvestment incur almost the same cost. The Conversely, if the same $200,000 were left $200,000 into an equity The money that’s parked in your255% homeearned 600%, far outpacing the measly rate.is, It’sinstead what the andtocredit only higher difference of banks referring that By repositioning to sit idle in the home for 30 years, it would doing nothing could be put to work earning you management account with a financial advisor by the stock market. unions do all thecost, time.it They borrow ouran cost as employment is referred to as not have earned a dime. something. money at 2% and then loan it back to us at you can achieve a net gain of $1 million

The power of leverage

How to create an extra million dollars for retirement

opportunity cost. By leaving the equity in the


“Homes are designed to house families,not store cash.” “Investments are designed to store cash.” from the NASD: “Brokers are not prohibited Betting theAssume ranch;yourisking 401 vacation condo to make the mortgage payments. client over thirty years. separatehome the investment recommendations. This would include from making such a recommendation per $200,000 of home equity using a mortgage adequately explaining the risks such an equity to buy securities Many successful people in the of Northwest se, equity so longisas Serious the investment isWe reasonably Home Money. don’t with a 5% interest rate. If the $200,000 grows which and are buying significant, to the dream of retiring a second suitable for investment in general, and it is investment, Recently the NASD issued an alert, “… gamble home equity. Liquidity and safety at because a conservative of 6.75% year, it The NASDorsimply wants home in Arizona Hawaii. With to oneensure the specific customer. In order toinvestor.” we arerate concerned thatper investors are suitable the key for philosophies when separating consumers million dollars or more saved in their willwho be must worthrely $1,419,275 in 30 years. After are receiving prudent advice. determine suitability, a broker should on investment returns to home equity. Rate of return is a distant IRA/401Ks, they decide to retire and buy consider the client’s investment objectives, deducting themortgage $216,000payments in interestcould payments make their end third benefit. Also, it is not necessary or the vacation home where they will spend financial status, tax status, and any other defaulting on their home loans if their andupthe $200,000 mortgage, you still have Tax deductions their winters. Whatto a surprise when they invest highlysuitable volatile information atofirm usesin to make investments they A are $1,003,275 leftdecline in yourand account. netunable gain ofto recommended discover that withdrawals to pay cash for a $350,000 investments. This You would can make client recommendations. include offset 401k meet monthly mortgage payments.” The or aggressive over onetheir million dollars. condo they need to withdraw nearly adequately explaining the risks of such at an of dollars by simply borrowing NASD is absolutely correct in advising againstthousands $500,000 from their What if Most successful retirees401K/IRA. have the majority investment, which areinsignificant, to the if the client must relytime on 5% and investing at 5% safe conservative Thisseparating exampleequity simply shows a one instead they had purchased the condo The NASD simply wants ensure of their assets in their home equity and the returns from their investment make investments without ever togoing repositioning of equity. Imagine to how thethe fixedinvestor.” 15 years earlier, cost $175,000, by consumers are receiving prudent advice. mortgage payments. As theywhen start itwithdrawing funds numbers grow for individuals that harvest into securities. In general, individuals IRA/401Ks. using the equity in their home? equity is Serious Money. We don’t andHome reposition their home equity every 5 should not invest home equity for “current from their IRA/401Ks, they are hit with a gamble home equity. Liquidity and safety are annual tax bill. Moreover, the kids Tax deductions to offset unless the investment is fixed significant years as their home continues to appreciate! income” Today their net worth would be $175,000 the key philosophies when moved thecondo’s mortgage is paid, and withdrawals guaranteed. Individuals interested in have Thisseparating is how the wealthy manage home and 401k higher, dueout, to the appreciation, home equity. Rate oftheir return tax deductible contributions to 401Ks and they would have the mortgage have should have ask themselves, equity to continually increase their is a distant third benefit. Also, it isnet notworth. variable Mostinvestments successful retirees the majority stopped. When they could useoff-set the mortgage interest deduction to help their make inmytheir mortgage payment Conversely, therecommended same $200,000 were left necessaryif or to invest in to “How of will theirI assets home equity and if IRA/401K withdrawals. In addition to the or aggressive I have reserve sit highly idle involatile the home for 30 years,investments. it would not my investments IRA/401Ks. Asdecline? they startDo withdrawing funds interest deduction the most, they don’t have financial would someone have it. As part ofadvantages, long term they planning, You can make thousands of dollars by simply funds from IRA/401Ks, they are hit with a or their a secure income?” In April 2004, have earned a dime. enjoyed the lifestyle benefits of owning is preparing for retirement may want borrowing at 5% and investing at 5% in safe the significant tax bill. following annual question wasMoreover, posed tothethekids whotheir vacation condo 15 years sooner conservative fixed investments without ever NASD, to have a mortgage going into retirement have moved out, the mortgage is paid, and “Where can I find the exact language than they planned. Betting thesecurities. ranch;Inrisking going into general, individuals tax deductible contributions to 401Ks have to help offset the annual IRA/401k tax bill prohibiting a broker from recommending that shouldequity not invest for “current stopped. When they could use the mortgageand enhance their overall financial goals. home tohome buyequity securities I takeinterest a mortgage out on my house and invest income” unless the investment is fixed sam your deduction the most, they don’t haveFor Making many, the uncle mortgage interest deduction the money in securities?” The written answer and guaranteed. Individuals interested in it. As part of long term planning, someone Recently the NASD issued an alert, “…because best partner offsets taxes due on retirement withdrawals, the isNASD: “Brokers are not prohibited investments should ask preparing for retirement may want wevariable are concerned that investors whothemselves, must rely fromwho thetax netlaw effect free withdrawals Under you of cantax deduct up to one fromtomaking such a recommendation per giving will I make mytomortgage if have a mortgage going into retirement on “How investment returns make theirpayment mortgage from their retirement account. million dollars of mortgage interest subject my investments decline? Do I have reserve to help annual IRA/401k tax bill long offset as thethe investment is reasonably payments could end up defaulting on their se, so to income restrictions. You can also deduct funds or a secure income?” In April 2004, and enhance their overall financial goals. home loans if their investments decline suitable for investment in general, and it is an additional $100,000 from home equity the following question was posed to the For many, thespecific mortgage interest deduction suitable for the customer. In order 401 vacation condo andNASD, they “Where are unable to meet their monthly loan interest. To take advantage of these can I find the exact language offsets taxessuitability, due on retirement to determine a brokerwithdrawals, should mortgage payments.” The NASD is absolutely deductions, make sure to secure a large prohibiting a broker from recommending that giving the net effect of tax free withdrawals Many successful people in the Northwest consider the client’s investment objectives, mortgage when you buy. Under tax law, correct inaadvising against separating if I take mortgage out on my houseequity and invest from their retirement account. dream of retiring buying only a second mortgage interest and is deductible for money securities?” The written thethe client mustinrely on the returns from answer their financial status, tax status, and any other home in Arizona or Hawaii. With one million information a firm uses to make suitable


dollars or more saved in their IRA/401Ks, they decide to retire and buy the vacation home where they will spend their winters. What a surprise when they discover that to pay cash for a $350,000 condo they need to withdraw nearly $500,000 from their 401K/IRA. What if instead they had purchased the condo 15 years earlier, when it cost $175,000, by using the equity in their home? Today their net worth would be $175,000 higher, due to the condo’s appreciation, and they would have the mortgage interest deduction to help off-set their IRA/401K withdrawals. In addition to the financial advantages, they would have enjoyed the lifestyle benefits of owning their vacation condo 15 years sooner than they planned. Making uncle sam your best partner Under tax law you can deduct up to one million dollars of mortgage interest subject to income restrictions. You can also deduct an additional $100,000 from home equity loan interest. To take advantage of these deductions, make sure to secure a large mortgage when you buy. Under tax law, mortgage interest is deductible only for $100,000 over acquisition indebtedness (the mortgage balance when home is purchased). Home improvements are the only exception. For example, if you sell your home for $400,000 and buy a new home for $400,000 with the cash from the sale, you will lose the tax break and liquidity. But worse, if you later decide to take out a home equity loan, only the first $100,000 will be tax deductible. Instead, secure a $360,000 mortgage (90%) when you buy the home and the entire amount is deductible.

Where to safely invest home equity Home equity is serious money. We are separating it from the home to conserve it, not to consume it. Therefore it should not be invested aggressively. Rather, home equity is best invested in safe, conservative investment

vehicles. Tax favored safe investments are ideal. You should consult your financial planner for the best investment vehicles for your specific situation. Many financial planners prefer the following tax favored products for investing home equity: • Investment grade insurance contracts • Annuities • Real estate investment trusts • IRAS • 401ks • Tax-free bonds • 529 savings plan

Case study: home equity management There’s a recent case study of a couple living in a $550,000 home in Bellevue, WA. They owed $360,000 on a 30-year fixed mortgage at 5.875% with a monthly payment of $2,130. They had $190,000 built up in home equity. A very common “Brother A”-type traditional scenario. After understanding the liquidity, safety, rate of return, and tax benefits of properly managing their home equity, this couple decided to separate $155,800 of their equity to invest in a safe conservative side account. By using an interest-only ARM they were able to increase their mortgage balance to separate this chunk of equity while decreasing their monthly mortgage payment to $1,656, a monthly cash flow savings of $474 per month. The couple conservatively invested the $155,800 lump sum and the $474 per month savings with their financial planner. If we assume a conservative 6% rate of return, their investment account will grow to $520,196 in 15 years. In the 15th year, they will have enough cash in their investment account to pay off their mortgage completely if they want to (15 years earlier than with their original 30 year mortgage!). However, armed with their new equity management

knowledge, they plan to keep the mortgage well into retirement so they can keep the tax deduction benefits and keep the money in the investment account where it’s more liquid, more safe, and will continue to grow and compound.

Case study: cash flow management It’s not necessary to have a large chunk of equity in your home to benefit from using your mortgage to create wealth. Many homeowners without a large equity balance have benefited by simply moving to a more strategic mortgage which allows them to pay less to their mortgage company each month, thereby enabling them to save or invest more each month. For example, a couple in Redmond, Washington followed traditional thinking when they bought their $400,000 home. They put 20% down and obtained a $320,000 30-year fixed rate mortgage at 6.00% with a payment of $1,919 per month. This is how the vast majority of Americans would purchase this home. However, once this couple understood the benefits of integrating their mortgage into their financial plan, they decided to make a change. They moved to a more strategic interest-only mortgage. They kept the same loan balance, but were able to reduce their monthly payments to $1,133 per month, a savings of $786 per month from their previous mortgage. The couple invests the $786 savings each month, and assuming a 6% rate of return, they will have enough money in their investment account to pay off their mortgage in 19 years (11 years sooner than their previous 30 year schedule!). Therefore, by simply redirecting a portion of their monthly mortgage payment, they were able to potentially shave 11 years off their mortgage. In addition, they also received the benefits of having their cash in a more liquid, more safe position throughout the process.


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CONSUMER CONSUMER REPORT– REPORT– HOME LOANS HOME LOANS

SHOPPING SHOPPING AROUND? AROUND? HERE'S THE INSIDE HERE'S THE INSIDE SCOOP SCOOPON ONHOW HOW TO DO IT RIGHT TO DO IT RIGHT

First: make sure you are working First: make sure you are workingwith withananexperienced, experienced,professional professionalloan loanofficer. officer.The The largest largest financial financial transaction ofof your life is isfar transaction your life fartoo tooimportant importanttotoplace placeinto intothe thehands handsof ofsomeone someonewho whois is not not capable capable of of advising you properly and troubleshooting the issues that may arise along the way. But how can you advising you properly and troubleshooting the issues that may arise along the way. But how can you tell? tell?

Here Hereare areFOUR FOURSIMPLE SIMPLEQUESTIONS QUESTIONSYOUR YOURLENDER LENDERABSOLUTELY ABSOLUTELY MUST MUST BE BE ABLE ABLETO TOANSWER ANSWERCORRECTLY. CORRECTLY.IFIFTHEY THEYDO DONOT NOTKNOW KNOWTHE THE ANSWERS… ANSWERS… RUN…DON’T RUN…DON’TWALK… WALK…RUN…TO RUN…TOAALENDER LENDERTHAT THATDOES! DOES!

1 3 4 2

What areare mortgage interest What mortgage interestrates rates based on?(The only correct based on?(The only correctanswer answer is Mortgage Backed Securities is Mortgage Backed Securitiesoror Mortgage Bonds, NOT the Mortgage Bonds, NOT the10-year 10-year Treasury Note. While the 10-year Treasury Note. While the 10-year Treasury Note sometimes Treasury Note sometimestrends trends in in thethe same direction asas Mortgage same direction Mortgage Bonds, it is not unusual to Bonds, it is not unusual tosee see them move in in completely opposite them move completely opposite directions. DO NOT work with directions. DO NOT work witha a lender who has their eyes lender who has their eyesononthe the wrong indicators.) wrong indicators.) What next Economic What is is thethe next Economic Report event that couldcause cause Report or or event that could interest rate movement? (A interest rate movement? (A professional lender will have professional lender will have this at their fingertips. For this at their fingertips. For anan up-to-date calendar weekly up-to-date calendar ofof weekly economic reports and events economic reports and events that may cause rates to fluctuate, that may cause rates to fluctuate, visit Facebook page Finance visit ourour Facebook page Finance of America Mortgage – Bryan of America Mortgage – Bryan

Johnson JohnsonLending LendingTeam Team––for fordaily daily updates. Want more? Let me updates. Want more? Let me know knowififyou youwant wanttotobebeadded addedtoto my myweekly weeklydistribution distributionlist. list.

When WhenJanet JanetYellen Yellen{Chairmen {Chairmen ofofFederal FederalReserve} Reserve}and andthe theFed Fed “change rates”, what does this “change rates”, what does this mean… mean…and andwhat whatimpact impactdoes does this thishave haveononmortgage mortgageinterest interest rates?(The rates?(Theanswer answermay maysurprise surprise you. you.When Whenthe theFed Fedmakes makesaamove, move, theycan canchange changea arate ratecalled calledthe the they “FedFunds FundsRate” Rate”oror“Discount “Discount “Fed Rate”.These Theseare areboth bothvery veryshortshortRate”. term rates that impact credit term rates that impact credit cards,Home HomeEquity Equitycredit creditlines, lines, cards, auto loans and the like. On the auto loans and the like. On the dayofofthe theFed Fedmove, move,Mortgage Mortgage day ratesmost mostoften oftenwill willactually actually rates move in the opposite direction move in the opposite direction theFed Fedchange. change.This Thisisisdue duetoto asasthe the dynamics within the financial the dynamics within the financial

markets marketsin in response response to to inflation. inflation. For more information For more information and and explanation, explanation, just just give give us us aa call). call). Do Doyou youhave have access access to to live, live, real real time, time,mortgage mortgage bond bond quotes?(If quotes?(If aalender lendercannot cannot explain explain how how Mortgage Bonds and interest Mortgage Bonds and interest rates ratesare aremoving moving in in real real time time and warn warnyou you in in advance advance of of aa costly costly intra-day intra-dayprice price change, change, you you are are talking talkingwith with someone someone who who is is still still readingyesterday’s yesterday’s newspaper, newspaper, reading andprobably probably not not aa professional professional and withwhom whom to to entrust entrust your your home home with mortgage financing. Would you mortgage financing. Would you workwith with aa stockbroker stockbroker who who is work only able to grab yesterday’s paper only able to grab yesterday’s paper tellyou you how how aa stock stock traded traded tototell yesterday, but but had had no no idea idea what what yesterday, the movement looks like at the the movement looks like at the presenttime time and and what what market market present conditions could cause changes in in conditions could cause changes thenear nearfuture? future? No No way!) way!) the


Be smart... Be smart... Ask questions… questions… Ask Get answers! answers! Get More than likely, this is one of More than likely, this important is one of the largest and most the largesttransactions and most important financial you will financial transactions you will ever make. You might do this only ever make. You might do this only four or five times in your entire four or five times in your entire life… but we do this every single life… but we do this every single day. It’s your home and your day. It’s your home and your future. It’s our profession and our future. It’s our profession and our passion. We’re ready to work for passion. We’re ready to work for your best interest. your best interest. SHOPPING... PART PART 22 SHOPPING... Once you you are are satisfied satisfied that thatyou you Once are working with a top-quality are working with a top-quality professional mortgage mortgage advisor, advisor, professional here are are the the rules rules and and secrets secretsyou you here must know to “shop” effectively. must know to “shop” effectively. FIRST, IF IF IT IT SEEMS SEEMS TO TO GOOD GOOD FIRST, TO BE TRUE, IT PROBABLY TO BE TRUE, IT PROBABLY IS. But But you you didn’t didn’t really really need need IS. us to to tell tell you you that, that, did did you? you? us Mortgage money and interest Mortgage money and interest rates all all come come from from the the same same rates places, and if something sounds places, and if something sounds really unbelievable, unbelievable, better better ask ask more questions questions and and find find a few more

thehook. hook.IsIsthere therea aprepayment prepayment the penalty?IfIfthe therate rateseems seems penalty? incredible,are arethere thereextra extrafees? fees? incredible, What is the length of the lock-in? What is the length of the lock-in? feesare arediscounted, discounted,isisititbuilt built IfIffees intoaahigher higherinterest interestrate? rate? into SECOND,YOU YOUGET GETWHAT WHAT SECOND, YOUPAY PAYFOR. FOR.IfIfyou youare arelooking looking YOU for the cheapest deal out there, for the cheapest deal out there, understandthat thatyou youare areplacing placinga a understand hugelyimportant importantprocess processinto intothe the hugely hands of the lowest bidder. Best hands of the lowest bidder. Best case,expect expectvery verylittle littleadvice, advice, case,

experienceand and personal service. experience personal service. Worstcase, case,expect expect that you may Worst that you may notclose closeatatall.all. often, not AllAll tootoo often, you don’t know until it’s late you don’t know until it’s tootoo late thatcheapest cheapest isn’t BEST. But that isn’t BEST. But youwant wantthe the cheapest quote if ifyou cheapest quote – head on out to the Internet, – head on out to the Internet, andwewewish wish you good luck. Just and you good luck. Just rememberthat that you’ve heard remember if if you’ve heard any horror stories from family any horror stories from family members,friends friends coworkers members, oror coworkers aboutmissed missed closing dates, about closing dates, or or big surprise changes at the last big surprise changes at the last minuteononinterest interest rate costs… minute rate or or costs… these are often due to working these are often due to working withdiscount discount internet lenders with oror internet lenders whomay may have a serious lack who have a serious lack of of experience. Most importantly, experience. Most importantly, rememberthat that the cheapest rate remember the cheapest rate ononthe strategy can cost thewrong wrong strategy can cost you more in in thethe long youthousands thousands more long run. largest financial run.This Thisis isthe the largest financial transaction most people will transaction most people will make lifetime. That being makeinintheir their lifetime. That being said not the cheapest. said– –weweare are not the cheapest. OfOfcourse our rates and costs areare course our rates and costs very but wewe have verycompetitive, competitive, but have also invested in the systems also invested in the systems and wewe need to to ensure thethe andteam team need ensure top quality experience that you top quality experience that you deserve. deserve.


THIRD, MAKE CORRECT COMPARISONS. When looking at estimates, don’t simply look at the bottom line. You absolutely must compare lender fees to lender fees, as these are the only ones that the lender controls. And make sure lender fees are not “hidden” down amongst the title or state fees. A lender is responsible for quoting other fees involved with a mortgage loan, but since they are third party fees – they are often underquoted up front by a lender to make their bottom line appear lower, since they know that many consumers are not educated to NOT simply look at the bottom line! APR? Easily manipulated as well, and worthless as a tool of comparison. FOURTH, UNDERSTAND THAT INTEREST RATES AND CLOSING COSTS GO HAND IN HAND. This means that you can

have any interest rate that you want – but you may pay more in costs if the rate is lower than the norm. On the other hand, you can pay discounted fees, reduced fees, or even no fees at all – but understand that this comes at the expense of a higher interest rate. Either of these balances might be right for you, or perhaps somewhere in between. It all depends on what your financial goals are. A professional lender will be able to offer the best advice and options in terms of the balance between interest rate and closing costs that correctly fits your personal goals. FIFTH, UNDERSTAND THAT INTEREST RATES CAN CHANGE DAILY, EVEN HOURLY. This means that if you are comparing lender rates and fees – this is a moving target on an hourly basis. For example, if you have two lenders that you

just can’t decide between and want a quote from each – you must get this quote at the exact same time on the exact same day with the exact same terms or it will not be an accurate comparison. You also must know the length of the lock you are looking for, since longer rate locks typically have slightly higher rates. Again, our advice to you is to be smart. Ask questions. Get answers. As you can imagine, we wouldn’t be encouraging you to shop around if we weren’t pretty confident that we feel that we can give you a great value and serve you the very best.


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Mortgage Protection Life Insurance So you took the plunge and bought a house, with a mortgage to match. You may be wondering if you need life insurance to cover the mortgage in case something happens to you before it’s paid off. Without life insurance, your estate will be liable for any outstanding home debt you leave behind. Unless your spouse is loaded, your family would face a sizable financial burden. One way of preventing that outcome is with dedicated Mortgage Protection Life Insurance. Here’s how it works:

Mortgage Life Insurance Basics Mortgage life insurance plans give a tax-free payout that will cover the balance on your home mortgage. Depending on the policy, the payout may occur in the event of your death, or in the event that you lose your job or become disabled. In some cases, the payout goes to your family, while in others

the insurance company pays your mortgage lender directly. Mortgage Protection Life Insurance is different from Private Mortgage Insurance (PMI), and from the mortgage insurance required for FHA loans, because it’s not required by the lender. Instead, it’s an optional measure some people take to protect their family’s biggest asset, their home.

Mortgage Life Insurance vs. Term Life Insurance For folks with mortgages, it can be hard to decide between mortgage life insurance and term life insurance. Let’s break down the key differences between the two. Many homeowners with mortgages choose to take out regular term life insurance. This form of life insurance provides a large pay-out designed to make up for lost income in the event of the policyholder’s death. The

cost of Mortgage Protection Life Insurance, by contrast, generally has a more limited payout because it’s designed to cover only home debt. So how do you know which one is right for you? With mortgage protection insurance, the payout must be used to settle the balance of the home loan. Regular life insurance, on the other hand, gives your family the option of using the settlement however they see fit. They can pay off the mortgage or continue it, save the money or invest it. Term life insurance is a more flexible option than mortgage life insurance. In addition to its relative inflexibility, the other reason to approach this option with caution is the high protection insurance rates you’ll pay for a diminishing return. With Mortgage Protection Life Insurance, you pay higher premiums for coverage that decreases each year


as your mortgage amortizes. With every mortgage payment you make, the value of your mortgage insurance decreases, since there’s less mortgage debt for the life insurance company to pay off. By contrast, with term life insurance a healthy person can negotiate more affordable, level premiums and get a policy with a larger payout that doesn’t lose value. But before you write off mortgage life insurance, read on to find out when it might be a good idea.

When Mortgage Protection Insurance Makes Sense There are certain people for whom mortgage life insurance may be a good fit. If you’ve been turned down for regular life insurance because of health problems, mortgage life insurance could be a good option for you, since your application is almost guaranteed to be approved without a medical

exam. Although there are age limits on eligibility for mortgage life insurance, there generally aren’t health requirements. Got a mortgage and a serious smoking habit? You might want to consider Mortgage Protection Life Insurance. For people with high-risk jobs, mortgage life insurance that pays out in the case of death, job loss or disability may make a lot of sense. That’s because it’s much easier to obtain – and cheaper – from insurance companies than straightup disability insurance. That means mortgage life insurance is a good option for, say, skydiving instructors. If you have a dangerous job that leaves you priced out of traditional disability insurance (and you have a mortgage), consider mortgage protection life insurance as a workaround. There’s one last group of people who could be good candidates for

mortgage protection insurance: servicemembers and veterans. Why? Because the VA offers its own brand of Mortgage Protection Life Insurance separate from mortgage life insurance companies. It’s called Veterans’ Mortgage Life Insurance (VMLI). VMLI is available to servicemembers and veterans who have severe serviceconnected disabilities, provided they meet certain requirements. VMLI offers policies with values up to $200,000. The payout will go directly to the mortgage lender, not to named beneficiaries.

Bottom Line If you’re thinking life insurance, your heart is in the right place.You want to protect your loved ones from financial worry and preserve the value of your estate. We applaud those instincts! If you’re in decently good health and don’t have a dangerous job, you’re probably better off applying for term life insurance rather than Mortgage Protection Life Insurance. With term life insurance, you’ll pay lower rates and get more. And by “more” we mean a higher payout that doesn’t lose value as you pay down your mortgage. Written by Cullen W. Crabbe, Chief Executive Officer with CWC Insurance Group. #602-327-2617 “Creating excellent opportunities for Agents and General Agencies”


A Team

DEDICATED TO YOUR SUCCESS

RANDI MARTINSON Marketing Coordinator

602-909-0276 rmartinson@atsaaz.com

LAURIE MARLOWE Senior Account Manager

480-290-0948 lmarlowe@atsaaz.com

- OFFICES VALLEYWIDE -

JOSH GUZOWSKI Business Development

602-752-8789 jguzowski@atsaaz.com


The Future of Real Estate

WHO TO WATCH FOR IN 2019


Russell Hathcock is Designated Broker and Owner of Zen Rent Property Management. He owns investment properties, a home repair company and various other business ventures. He is an expert in real estate trends and local market topics, has published numerous articles in multiple magazines and has appeared many times on various real estate radio broadcasts. Russell participates in numerous professional associations, including NARPM, the National Association of Realtors and the Southeast Valley Association of Realtors. He holds leadership positions on several boards and chapters. He is a winner of the SEVRAR YPN “40 Under 40” award in 2017 & 2018 and was on the 2018 Inc 5000 list.

Russell Hathcock RMP®, CRPM®, DESIGNATED BROKER

480.926.7525 russ@zenrentpm.com www.zenrentpm.com

“On the plains of hesitation lay the bleaching bones of countless millions. Who on the dawn of victory sat down to rest and resting died.” - Unknown

Scott, aka “Scott From Scottsdale” has been a Real Estate Agent in The Valley since 2002, and services the entire Valley. Originally from Northern California, he received his Bachelors Degree in Finance From California State University, Sacramento in 1997 before moving to Arizona in 1999. He has been coached by The Mike Ferry Organization, The Largest Real Estate Coaching Company in the World, for 15 + years. He is considered an expert in contacting For Sale By Owners and is in the Top 1% Of Listing Agents in ARMLS. Recently, Scott changed Brokerages and made the switch from a Great 100% Brokerage, and moved to eXp Realty. When asked why he would move from a proven 100% Brokerage, to eXp, where there would be a Commission Split, Scott said “I went to an eXp Event, and all the agents were having FUN, while building WEALTH, Residual Income, stock and building what will become the biggest Real Estate Brokerage in the world. I saw the growth potential, and the long term vision for myself and I wanted in. Then, I thought about all the other agents I know and how I could help them to see the same long term vision of building wealth. How cool is it that I still sell real estate, but I help my agent friends build wealth at the same time?” If you would like to hear more about how you can build residual income, acquire stock and build long term wealth as a Realtor selling homes, like you are already doing, please reach out to me. (480) 363-2820

Scott Marlow REALTOR®

480.363.2820

scott.a.marlow@gmail.com


Eric is a Realtor® and the Team Leader of Hegan Homes Brokered by eXp Realty. Eric’s team services the entire Phoenix metro area, as well as having an extensive referral network that expands through all 50 states, 3 Canadian Provinces and parts of Northern Mexico. Eric has a Bachelors Degree in Hospitality & Business Management from the Le Cordon Bleu College of Culinary Arts. Eric credits his team’s ability to create a truly “service first” approach with his clients to his hospitality background. Their mission statement is simple yet profound: “Every Client, Every Time”. When he is not helping clients and coaching agents, he can usually be found on one of the valley’s many pristine golf courses, spending time in the outdoors with his Labrador Cash, or volunteering with the Special Olympics of Arizona.

Eric Hegan REALTOR®

480.795.7035 eric@heganhomes.com www.heganhomes.com

“We are what we repeatedly do. Excellence then, is not an act but a habit.” - Aristotle

A wealthy American playboy, philanthropist and owner of a large corporation. After witnessing the murder of his parents as a child, he swore vengeance against criminals and an oath tempered by a sense of justice. After years of crime fighting, decided to give up his cape and cowl to assist first time home buyers and for sale by owners in saving both time and money. Currently seeking a high C on the DISC assessment as his friend Alfred is unwilling to take his transactions from contract to close.

Jesse Scheel REALTOR®

“Stop building someone else’s business and start building your own.”

480.382.8922

jesse.scheel@exprealty.com www.jessescheel.com


My journey to real estate began when I was 18 years old with a sparked interest in investing. Over the next several years I dabbled in foreign currencies and stocks, eventually finding my way to my true passion; real estate. I have now been in real estate for just under 2 years. Within my first 12 months of sales I closed on 17 transactions equaling over $3 million. Moving forward I aim to assist all of my clients in making their next big move, whether my assistance comes through buying, selling, or both. Furthermore, I wish to insure that they feel confident and comfortable with their decisions and the real estate market as a whole. My dedication to my clients sets me above my competitors. I give my full attention to each and every client and work hard to make sure they know I am there for them every step of the way. For me, real estate is a way of life. I would love for you to come on the journey with me.

Colton Harris REALTOR®

623.202.3657

Colton.Harris@exprealty.com www.ColtonHarris.com

“Limits like fears, are often just an illusion.”

Ryan Zolin is a real estate agent that specializes in residential home sales in the East Valley of Arizona. He was born in Chicago, Illinois and moved to Arizona when he was 5 years old. He owns and operates his own team, The Zolin Group. Ryan is well known for being one of the youngest realtors in the industry. He is 20 years old and has sold over $20 million in real estate, with almost a quarter of that being commercial deals. Ryan got in the real estate industry in 2016 at only 18 years old. He has accomplished in only two years what many aspire to their entire careers, let alone by the age of 20. Many have asked, how did Ryan have this mindset at 18 years old? He was the Vice President of a business marketing club in high school (DECA) and competed at a national level, which gave him the confidence he needed. All of his focus is on his team and they are currently on track to close roughly $20 million in sales in 2018 Starting in 2019, Ryan is launching his new podcast where he’ll be talking with other successful entrepreneurs, his own successes and struggles and also talking with his clients and getting to hear their story. Each person has a story, and The Zolin Group loves getting to know their clients and making each transaction a little more personable. “The Property Punk Podcast” will be launched in January, and it will be another way for Ryan and his team to spread their positive message and attitude across social media.

Ryan Zolin

480.612.2213

OWNER, THE ZOLIN GROUP

“People will stereotype all day long. But if you forget your own age, you’ll get so focused on the business that you become ultra-confident and people will forget to question how old you are.” Gurbash

Ryan@ZolinGroup.com www.ZolinGroup..com


Kindar has been an Arizona Realtor for over 15 years. After moving to eXp Realty in 2018, she started her own team Kindar & Co. Their approach to service is to become your Real Estate Resource for Generations. Striving to bring you a positive experience and epitomize integrity, energy and hard work in every detail of your real estate transaction. Representing buyers, sellers and investors in both residential and commercial markets. Kindar & Co. agents have a long record of successfully guiding local and multi-national clients with their real estate transactions. Specific areas of expertise include active adult, luxury homes, military/police and investor relations. The relationship you build with Kindar & Co. doesn’t end with the closing. They want to become your real estate resource for life, always there to answer your questions long after the deal is done.

Kindar Ashford REALTOR®, TEAM LEAD

520.494.3993

KindarAndCo@exprealty.com www.KindarAndCo.com

Jennifer Wehner is an associate Real Estate broker and Top 1% Realtor with eXp Realty in Scottsdale, AZ. Jennifer has over 16 years experience in Real Estate, and is in the Top 20 agents out of over 40,000 agents in the MLS. Jennifer runs a highly skilled team of agents, marketing specialists, Expert transaction and listing managers, a team Photographer/Videographer and both Inside and Outside Sales agents each with a specialized niche.Their #1 goal is to provide the ultimate client experience with a wide array of customer programs. Jennifer was the #1 Female RE/MAX Team Leader in AZ before moving to eXp Realty which is the fastest growing brokerage in history. The Wehner Group is committed to giving back to community and is active with Sunshine Acres Childrens Home as well as many other awesome organizations in the Valley. As a coach for Craig Proctor, she loves giving back to the agent community whether it be public speaking, holding local masterminds, private consultations and more!

Jennifer Wehner OWNER AT THE WEHNER GROUP

“You can have everything in life you want if you just help other people get what they want.”

480-939-6308

jennifer@jenniferwehner.com www.wehnergroup.com


Adversity creates Tenacity. Kimberly Tocco, AKA Tenacious T, specializes in helping families who have gone through hardships start a new chapter through home ownership. Averaging 10 million in sales and moving 30 to 40 homes a year, she has given back over $300,000 in closing costs over the last five years to her clients. Winner of the 2018 Most Inspiring Realtor and HGTV featured agent for 2018 and 2019, combined with the mentorship of Brian Culhane, Kimberly Tocco is a force to be reckoned with.

Kimberly Tocco REALTOR®

602.769.1476

toccotenacity@gmail.com www.TenaciousRealEstate.com

A busy mother of 3 girls, Madalyn 12, who is into softball and volleyball, Abigail 10 who likes to do the school plays and volleyball and Emma 8 who is also involved in the school plays and volleyball, Christine Gioia of Gioia Property Partners likes to keep active by spending time hiking, hitting the roller rink, jeeping in Sedona while exploring the great Arizona landscape and jumping in the RV to take family trips. The best place we’ve seen so far are the Rocky Mountains in Colorado Springs! Nothing beats the cool mountain air! In her downtime, Christine has started a program helping make care packages and handing them out to people in need. Feeling very fortunate, Christine’s whirlwind of success in the short 5 years as a Realtor has earned her the coveted designation of Rookie of the Year in her first year at her first office, and has since been rated as one of the Top 100 Most Influential Agents for Arizona. Now, one year after joining EXP Realty, Christine has earned ICON Status among her peers and is now ranked among the top 1% of agents in the Country. Every client is very important and has become like family!

Christine Gioia

REALTOR® | ICON AGENT | OWNER

480.234.2961

christine@homesalesphoenixaz.com www.homesalesphoenixaz.com

“Do what you want and say what you feel, for those who matter don’t mind and those who mind don’t matter” - Dr Seuss


Sameer has lived in the valley since 1999 and has tremendous knowledge of the area. Having a family background of Construction and Real Estate business in India, being passionate about real estate was second nature to him. After graduating in 2005 with a degree in Hospitality Management, Sameer became an avid investor in both, residential and commercial real estate, including owning and operating Hotels in Tucson and Phoenix metro area. Coming from a hospitality background, Sameer epitomizes integrity, hard work, dedication, and above all outstanding client service. As a successful business owner and Realtor, he understands the importance of using high-tech marketing techniques, personal touches and being a skilled negotiator with his client’s best interests at heart. Sameer specializes in applying his investment expertise and market knowledge to consistently exceed the investment goals of his clients. He finds passion and purpose in connecting with people, sharing experiences and using innovative approaches in the traditional world of real estate. Sameer strongly believes that his duty is not just to represent his clients, but also to educate them every step of the process with top-notch information and market insight, so they can make the best decisions possible. Sameer and his family have lived in the Desert Ridge area since 2011. In his free time, he cherishes spending time with his beautiful wife (Pooja) and his two adorable kids (Pranay and Amaira). He loves reading books to his daughter and going to swim meets with his son. He enjoys going out with his family to local events, meeting new people within the community, and exploring local restaurants.

Sameer Mehta REALTOR®

480.277.7205

Sameer.Mehta@exprealty.com www.TheTeamAZ.com

“Try not to become a man of success, but rather try to become a man of value.” - Albert Einstein

Entrepreneur Kristine Vowles is known for implementing her own creative style, forward thinking and applying it to businesses by developing unique out of the box concepts which garner measurable results. This is what she has done her entire real estate career and from the beginning when she launched The Luxury Look and award-winning Luxury Home Consulting, Design and Staging company. When she is not handling the details and business development for the company, Kristine stages high-end homes as well as consults on Luxury Properties on a global basis. She also enjoys sharing her talents with others and hosts masterminds for interior designers, stagers and real estate professionals. Kristine will be implementing training courses for the home staging, real estate industries and launching a new Airbnb division early 2019 which will create a complete turn key solution for investors, vacation home owners, new home buyers and home stagers. Kristine is the exclusive designer with her business partner actor Dan Hildebrand, an award-winning Dome Builder. Together they are creating housing for a changing world, as well as boutique hotels, spas, retreats, storm shelters and so much more.They specialize in Monolithic and Eco-shell Domes – earthquake, hurricane and fire resistant, energy efficient and cost-effective housing and community buildings. Whether in the wake of natural disasters or as urban redevelopment, the construction of Eco Shells or Monolithic Domes provide high quality and local employment opportunities. And now with the addition of Kristine Vowles, the design possibilities will be endless as she shares her real estate and design experience in far reaching places.

Kristine Vowles REALTOR®

Owner of The Luxury Look One of top 100 “Most Influential in the Industry” AZ State Pres.of Real Estate Staging Assoc. (RESA)

“Think social media first when placing properties on the market. What message are you trying to convey?” - Kristine Vowles

602.578.6707

Kristine@theluxurylook.com www.TheLuxuryLook.com


CHANGING THE WAY PEOPLE DO REAL ESTATE

As a techno savvy Real Estate Professional with over 15 years of experience in residential property management, I’ve watched as society has shifted from one set of gadgets to the next. Those changes have forced myriad businesses and industries and even society itself to evolve. User friendly, customer focus, ease of use, transparency, and employee reviews dominate as old ways of doing things are changing for the better. I have watched as a youth when my ideal Friday evening was cruising to the mall to gawk at the latest fashion trends amongst the various shops and outlet stores. Sometimes to look cool I’d pull out my pager just to see if anyone sent me their phone number yet. These days pagers are virtually unheard of and are rendered obsolete by cell phones. Similarly, I have watched as companies like eXp Realty lead the charge in the ever-changing evolution of human interaction through the usage of technology; both in the way consumers buy and sell homes, and the way agents are employed and conduct business. Since its inception in 2009, eXp Realty has grown to a staggering 15,000 agents and is the 5th largest real estate company in America by number of agents.

IN THE NEWS eXp Realty has been in the news for several high-level noteworthy achievements. According to CNBC, eXp Realty is a subsidiary of eXp World Holdings, Inc and is

the largest residential real estate brokerage by geography in the North America. Founder Glenn Sanford was named a Top CEO in Glassdoor’s Employees’ Choice Awards. Sanford was ranked No. 40 among small and medium businesses. eXp Realty is a national, cloud-based real estate brokerage, which provides 24/7 access to collaborative tools, training and socialization for real estate brokers and agents through its virtual campus environment. As a publicly traded company, eXp World Holdings, Inc. uniquely offers real estate professionals within its ranks opportunities to earn company stock for production and contributions to overall company growth. In July 2018, it was announced that Founder Glenn Sanford won the 2018 Inman Innovator Award for Most Innovative Broker Owner. “I am honored to carry home the Most Innovative Broker Owner Award for the more than 15,000 agents and staff who make eXp Realty such an amazing place to work. It has been a real treat to spend time with the other finalists, speakers and idea-makers this week at Inman Connect,” said Sanford. “Innovation is one of our core values that we have embraced from our first day in business, so this award is a culmination of the team’s hard work.” The Inman Innovator Awards winners are selected by the Inman News editorial team and represent companies or individuals who consistently try new things, adopt new technology, create a new culture or approach to real estate or has figured out how to achieve an unmatched level of success.


At its annual EXPCON conference the company announced it is the first real estate brokerage to operate as one brokerage with company-owned (non-franchised) offices in all 50 U.S. states, the District of Columbia, and three Canadian provinces. Agent count has more than doubled since the beginning of the year. Work space satisfaction ratings website Glassdoor recently announced eXp as a two-time recipient of their Employees’ Choice Awards for the Best Places to Work the Best Places to Work list is an annual report highlighting the best work environments in the country. Glassdoor analyzed company reviews, based on past and present employee workplace satisfaction. eXp Realty ranked No. 49 and received 4.7 stars. “We are thrilled that our eXp family has once again honored us with positive feedback on Glassdoor,” Senior VP of Human Resources and Employee Experience Mike Vein said. “At eXp, we give people the opportunity to think big and move ideas forward to make the company better, and we are humbled to see that resonate in our reviews.”

INTERVIEW WITH BRIAN CULHANE Recently I had the opportunity to visit with Brian Culhane, Founding member and past company President. We first met in a coffee shop where we immediately began sharing goals, dreams, ideas, and aspirations on a vast array of subjects from business to philosophy and philanthropy. During follow up visits I’m struck by his sincere desire to help people succeed. As Culhane states, “my success is based on the success of others”. Culhane is a testament to the Employees’ Choice Award that they received as he described to me vividly eXp Realty’s foundational story and its agent centered focus to create a recession proof business during our

visits. “We are helping people achieve the American dream of business ownership,” he said. Culhane first met Glenn Sanford while inquiring about a team leader ad on Craigslist. Sanford at the time was running a highly ranked team at a different brokerage where they both hung their licenses. At that point Sanford was already a top producing agent with expansion teams in multiple states including the Seattle Washington area. Sanford was an experienced computer programmer. According to Culhane, Sanford had already figured out the Google algorithm codes and his lead generating website were number one in each of the 5 markets they were operating in with thousands of leads coming in regularly. He was producing millions of dollars in sales. One of the attracting features of their former nationwide brokerage was that it had a “profit share” where the company was supposed to share its profits with its agents. ”But,” Culhane says, “the profit share model at that brokerage didn’t work.” He said their profit share checks never added up to what was promised. After being a million-dollar top producing agent for so many years both Sanford and Culhane left that brokerage and started their own traditional brokerage. Soon thereafter the 2008 market crashed leaving them struggling to make ends meet. It was during these hard times that the idea of using technology to create a recession proof business model was planted. Being dissatisfied with the traditional real estate brokerage model, Sanford began exploring opportunities to transfer his team with several different startup brokerages claiming to be virtual offices. They soon became aware of one brokerage that had a more


simplified profit-sharing called revenue sharing. The profit share model pays out after all the expenses of the company are paid and a revenue sharing model pays out before all the expenses are paid. It was a major shift on Sanford’s balance sheet. When in discussions to transfer their team to this brokerage they realized that while they were attracted to the revenue sharing model, they felt this brokerage needed some improvements with their virtual cloudbased technology, and that they were bringing more value to the brokerage with their massive lead generating power search websites than would be given to them. They decided to go back to the drawing board and with in a few days Sanford had sketched up the idea for a recession proof cloud based seven level revenue sharing brokerage that they would start themselves and which later became eXp Realty.

THOSE WHO DON’T LEARN FROM HISTORY ARE DOOMED TO REPEAT IT. When looking at businesses and industries that came face to face with the impact of changing technology, we need not look any further than Blockbuster vs Netflix, Taxi vs Uber, music industry vs Apple, retail stores vs Amazon, hotel industry vs AirBnB, and many others. History books are full of businesses that were once considered too big to fail and how innovation in technology tipped the David and Goliath like battles into victories for the small virtually unheard-of businesses. eXp Realty is no exception to this fundamental equation. After learning more about them I am excited to see the heights of where their stock and prestige will soar.

Russell Hathcock

So, what makes eXp different among the top real estate brokerages? Their one of a kind cloud office called eXp World. Agents can login online and in a virtual environment learn, share, and collaborate with other eXp agents anywhere in the world. As a cloudbased business, eXp is not anti-office space. They have partnered with Regus, an all-inclusive office space provider, where agents have access to Class A office space in over 3000 locations in 120 countries. Teams and individuals are welcome to rent their own office spaces as needed.

RMP®, CRPM®, DESIGNATED BROKER

In closing my long-winded hang out session with Culhane, I asked what his future holds in store. He chuckled saying, “at eXp, most wishes come true.” He summed up by hinting at more client and agent focused technology and staying the course in innovation. It’s clear Culhane loves the company he helped found and all the friends that he has created along the way.

Author: Russell Hathcock

480.926.7525

russ@zenrentpm.com www.zenrentpm.com

Disclaimer: This writing is based on the author’s own work, research and perspective and is intended to be anecdotal in nature. He is not a stock broker or trader. This piece is not intended to be financial advice in any way.

For more information, please visit the company’s website at www.eXpRealty.com or www.eXpworldholdings.com


Power Partners

WHO TO WATCH FOR IN 2019


What are you passionate about? I’m pretty passionate about my career. I’ve been in the business for almost 20 years now and I’m so grateful for all I’ve learned by listening and learning from the best of the best! I’ve always taken a lot of pride in my work and I love watching my clients succeed. What are your sales numbers for the last 12 months? The awesome REALTORS® I work with generate about $3.5 to $4 million in title & escrow fees per year for American Title! It’s a lot to maintain but my little marketing team IS AMAZING! What is the book you’ve given most as a gift? My Favorite book- Extreme Ownership: How US Navy SEALS Lead & Win “On any team, in any organization, all responsibility for success and failure rests with the leader. The leader must own everything in his or her world. There is no one else to blame. The leader must acknowledge mistakes and admit failures, take ownership of them, and develop a plan to win.” Tell us about your family: I have two sons ages 15 & 24. My older son, Brandon, is an aircraft mechanic and underwater welder and Zak is a sophomore in high school. They’re smart, fun, loud and crazy boys and they keep me hopping. I just hope they are learning something from my independence and how my hard work has paid off. What obsessions do you explore on the evenings or weekends? Besides spending time with my family and friends, I LOVE traveling, exploring new places and new activities, and have always tried to make staying fit a priority. If someone told you they were thinking about becoming a real estate agent what advice would you give them? Meet with my team ASAP because we can help you develop a marketing plan that saves you time and money. It’s extremely important for REALTORS® to partner with the right people so they aren’t constantly having to reinvent the wheel. What are some of your goals for 2019? To continue to exceed my personal production by working smarternot harder- and to help my REALTORS® do the same! Last parting words? The real estate business can be incredibly profitable and so much fun if you do it right and with the right people!

Laurie Marlowe SENIOR ACCOUNT MANAGER

480.290.0948

lmarlowe@atsaaz.com www.americantitleserviceagency.com

“If you are your authentic self you have no competition.”


What are some of your goals for 2019? Personally, I am just striving daily to be the best husband to my AMAZING wife, Carmen, as we forge a stronger union every day! Being a top notch dad for my two girls, Bella and Gianna, to look up to as they grow up. Business wise, my top priority is to educate as many consumers and industry professionals as to the huge benefits of working with a Mortgage Broker as we continue what I’ve coined: the “#brokertakeover” movement. These benefits, once known by the masses, are so overwhelming that the rest of the goals will take care of themselves. I’m bringing Broker back. What is something you believe that other people think is insane? That one day on vacation I am going to run into 2Pac in the Caribbean. What is the book {or books} you’ve given most as a gift? The Cat in the Hat... haha I’ve got kids and from my last answer you now know I love old school rap. But on a serious note, I love the “Power of Now” and recently “The 10X Rule”. What are your morning rituals? What does your first 60 minutes look like? Ha some would say they’re a little crazy, especially my wife, but it works for me. I don’t sleep a lot so I’m usually up before my alarm goes off at 4:30am. Lately I’m up before 4am. First thing I jump on my treadmill for 30 minutes of walking while I check my daily calendar and send emails to my team about things pertinent for the day. There may be some Facebook involved there too hahaha. Those that are on my Facebook will notice the timing of my posts are usually before they wake up. I’ll then eat a quick breakfast, usually egg whites and oatmeal or a piece of fruit. Then I’ll bike a couple miles to the gym for a good workout where I’ll continue the emails, Facebook and just more “me” time to focus on kicking the day’s ass. Bike back home, let the dog out, pack up my gear, clean up and I’m out the door at 8:15am so I’m plugged in by 8:30am. There you go, you asked for 60 minutes and for 4 hours plus....but that’s the daily for me and I love it! If you could have one gigantic billboard anywhere with anything on it, what would it say? Oh man, let me think and try to keep it clean hahaha. Just kidding, that’s easy: #brokertakeover Tell us something about yourself that most people don’t know? Although I got into this business back in 2003 as a Loan Officer and that’s what I prefer to do, I actually was a full time licensed Realtor for 5 years as well. Having worked this business from both sides has given me a very unique prospective which my clients and agent partners love and appreciate. While I am sitting in the seat I prefer, being an agent previously gives me a unique skill set that very few have.

BrettWeiss

BRANCH MANAGER - NMLS #227468

“Things may come to those who wait, but only the things left by those who hustle.”

602.410.2515

bweiss@nexamortgage.com www.HomeownerMag.com

M o r tg a g e


Jason Wojtyna brings passion, enthusiasm, and 15+ years of experience to each client he works with. A top tier professional, Jason is determined to find the best mortgage available for each client. His dedication to following up with annual mortgage reviews, Jason keeps his clients’ short and long term financial goals at the forefront of his work. Providing home-buyers the tools to purchase their dream home is Jason’s top priority and centers his service around this tremendous honor. With 90% of business coming from referrals, Jason is both proud and humbled to consistently exceed expectations so that clients can refer him to friends and family. When not crunching numbers, Jason gives back to his community through the All In for Kids Poker Tournament, a quarterly event that supports Phoenix Children’s Hospital where he has raised over $20,000. He also loves spending time on the golf course with his son, Dylan, and running around the valley watching is twin daughters, Tatum & Brooke, compete in Club soccer. Working with Jason means that all of your financial needs will be taken care of so that you can relax and enjoy your beautiful new home!

Jason Wojtyna

SENIOR LOAN OFFICER FAIRWAY INDEPENDENT MORTGAGE CORP. NMLS ID # 259199

602.568.8221 JasonW@fairwaymc.com


Having been in the real estate industry over 25 years….everything from design, remodels, renovations, new construction, property valuation, sales, rentals and home warranty, I have much gratitude for the opportunity to have toured thousands of homes over the years. Every home has it’s own personality and splendor which gives me inspiration for new ideas and adaptations to carry forward. I suppose my passion of architecture and design goes way back to when I was a young kid growing up designing homes in our backyard sand box- (which, had the most fabulous sand -Minnesota ‘glacier-ground-sandstone” sand that held shape so wonderfully!) To this day, I still love to redesign interior spaces creating a flow and function unique to the home and it’s owner. Travel is another passion. I love to travel! So far, 20 some countries, over 4 continents and so much more to see! The architecture, the cultures, people, foods and how significantly the experience expands the mind is one of the greatest gifts, I feel, I can offer my son. Our annual birthday trip (our birthdays are two days apart) is the first and foremost priority on my annual goal sheet. It is so much fun to choose a location, research, learn, plan, and talk about it forw weeks and months even before we go! The trip, the memories, photos and discussion are wonderful for years to come. I enjoy being active. Volleyball, hiking, biking, tennis, skiing, yardwork, trimming trees, working on houses and even the demolition. Life is an adventure! ….as we let our own light shine, we unconsciously give other people permission to do the same…

Mary Pierce SENIOR ACCOUNT EXECUTIVE

800.445.6999

Ext. 1164

MaryP@orhp.com www.myorhp.com/marypierce


Top Ten Reasons to Buy Life Insurance Life insurance is one of those things that just about everyone needs but far too few people actually have. It’s easy to put off purchasing a policy when you’re young and relatively healthy. But the longer you wait, the greater the chances of something happening before you get yourself coverage. Maybe buying life insurance been on your to-do list for a while but you haven’t gotten around to it yet. Check out these 10 reasons why you can’t afford to wait any longer.

1. Replace Lost Income Life insurance works to provide financial security to your loved ones after you pass away. You have to consider what would happen if you were to die suddenly. This is especially true if your loved ones rely solely on your income. Get yourself adequate coverage. That way, you won’t leave your loved ones helpless when the monthly bills come around.

2. Cover Burial Expenses Sadly, even a basic funeral service can run upwards of several thousand dollars. While it’s possible to pre-pay for your funeral, people don’t often think that far ahead. Prepayment can ensure everything is in place for your loved ones after you die. However, there are risks to pre-payment. Life insurance can give you and your beneficiaries more of a guarantee, lifting a burden off of them as well as yourself.

3. Pay Off Debt Just because you die doesn’t necessarily mean your debts will disappear. In the instance that you and your spouse have co-signed for a mortgage or other loans, your spouse may become entirely responsible for repayment. The

other outcome could result in creditors trying to collect from your estate. While that gets rid of your debts, your heirs will receive the depleted remainder. Life insurance allows those you leave behind to take care of any lingering financial responsibilities.

4. College Planning There are a number of ways to save money for your child’s education. You may not have thought that a life insurance policy would be a viable option. But insurance payouts can actually provide a good supplement your savings. If your child ends up borrowing money to get through school, the insurance proceeds could also help wipe out pesky student loans.

5. Build Cash Value Term life insurance, a type of life insurance, stays in place for a set period of time. But another option, whole life insurance, provides permanent coverage that only ends if you cancel the policy. Whole life insurance allows you to build up cash value over time, an attractive prospect to any people. That cash value acts as an extra cushion that you can tap at any time. This may come in handy if you have a financial emergency down the road.


6. Diversify Investments Some people also use life insurance as an investment tool with universal life policies. These policies are tied to a specific investment product. Then policyholders receive dividend payments based on the product’s performance. Before you dive into this type of insurance, you’ll want to read the fine print. That way you’ll know the potential risks and returns before you commit.

7. Business Planning If you own a business, it’s vital that you have life insurance. This covers your obligations so your hard work doesn’t go to waste. Are you involved in a partnership with someone else? You should both have coverage. That way, if one of you dies, the other isn’t left holding the heavy financial bag.

8. Estate Taxes When someone passes away, their heirs often face estate and inheritance taxes on any assets they receive. If you’re worried about your loved ones getting hit with a big tax bill, a life insurance policy can help cover these added costs.

9. Coverage is Affordable One of the excuses people tend to make for not buying life insurance is the cost. But truthfully, coverage often ends up pretty affordable for most people. Term life tends to be less expensive than whole or universal life. Plus, the younger and healthier you are, the lower your premiums will be. Unless you smoke or have a preexisting health condition, you could find coverage for as little as $1 a day. Compare policies now to see your affordable options.

10. Peace of Mind No one can truly predict the future. But having life insurance means you and your loved ones can prepare for any eventuality. Even with a small policy, you may find yourself sleeping a little easier at night knowing that your family has protection in place should something happen to you.

Next Steps Convinced that you need a life insurance policy? Call an independent Life Insurance broker find a policy that fits your needs. Written by Bryan Johnson, Independent Life Insurance Broker 480-295-9050


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8 Habits of Millionaires By Holly C. Brauer, Financial Advisor and Wealth Manager

Imagine you look back on your life a year from now, and it is the best year of your life! What does it look like? What is your career? How much money did you make? How much did you save? What is your relationship with your family and loved ones? What are the things you are most passionate about that you had the freedom and time to do? All of these questions will help you get to your true why? Why is this important? Because if you want to become a millionaire, you must think like a millionaire. Have you heard the adage “You become what you think about?” Therefore, in order to think like a millionaire, you must study millionaires. From many years of research, daily habits can dictate how successful or unsuccessful you become in life. The good news is that all habits can be changed, and you can start implementing them today!

1

Millionaire Mindset

Millionaires have a mindset they will become successful and wealthy. They envision it every day. Albert Einstein said, “Imagination is more important than knowledge.” If you could have anything in this world, would you go after it? So, what is stopping you now? Many people have a fear to fail. When Thomas Edison was asked how it felt to fail 1,000 times before inventing the light bulb, he replied, “I didn’t fail 1,000 times, the light bulb was an invention with 1,000 steps.” It’s all about how you perceive things, and mindset is everything! There are many millionaires who went broke several times, and even bankrupt, but learned the greatest lessons and never gave up until they succeeded. Start now by getting in the right mindset, and you will be unstoppable!

2

They wake up early and set goals

Many millionaires will have accomplished more by 9am, than the average person does in a day. They wake up early, and have crystal clear goals. More importantly, they pursue their own goals rather than living someone else’s dream. This gives them more passion, determination, and energy creating long-term happiness and success. Your goals act as a roadmap. Could you imagine showing up at the airport, and just hopping on any flight hoping to get to the right place? It would be difficult to plan a trip, without a destination in mind. Goals also create more opportunity and less obstacles. You focus on the positive, and stop noticing the negative. Start today by writing out your goals and dig deep until you get to your true why. Then start tomorrow


by waking up three hours before you begin your workday. This strategy will help deal with disruptions, which can subconsciously make us feel like we have no control over our life. Get up early and tackle the top three things you want to accomplish that day!

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7

They have successful friends

We often hear you are as successful as the average five people you hang around. It’s the law of attraction. If you’re constantly hanging around negative people, then it will shift your mindset and can stop you from reaching your full potential of success. Remember, great minds discuss ideas, average minds discuss events, and small minds discuss people. If you’re the smartest person in the room, then you’re in the wrong room. Look for mentors and other successful people to surround yourself with, and re-evaluate your circle of influence. Even the negative news media can have an influence on you, and so you must be aware of your thoughts. Set a goal to go 30 days without listening to the news, and instead listen to a positive audiobook, podcast, or TedTalk to learn something new.

Must read books: “The Millionaire Next Door”

by Thomas J. Stanley and William D. Danko

“Think and Grow Rich”

by Napoleon Hill and Steve Harvey

“The Compound Effect” by Darren Hardy

4

while saving time and money. If you’re not up for wearing the same thing every day, then make sure you plan tomorrow today.

They never stop learning

Millionaires read constantly and consistently, and would rather be educated than entertained. They read at least 30 minutes a day and read to maintain or acquire knowledge. They mainly read informative books on history, personal development, or biographies of other successful people. Set a goal to read a minimum of one educational book a month.

Photo Credit: Lark Pronty of Prime24photography

5

They keep their mind and body fit by working out

Exercise is not only good for the body, but is great for the brain. Research shows that cardio helps grow neurons (brain cells) in the brain, and produces more glucose which fuels the brain. The more it grows, the smarter you become. Knock out 30 minutes of cardio a day, and read a book while you’re at it.

6

They are mindful of the choices they make

Did you know on average we make over 35,000 decisions a day! You decide what time to set your alarm, if you hit snooze, should you brush your teeth or shower first, what you should wear, what you will eat, and the list goes on. Have you noticed that Steve Jobs and Mark Zuckerberg wore the same kind of outfits every day? Why? Because it was one less choice they had to make that day. Have you heard the term decision fatigue? It’s when your choices start to deteriorate after having a long session of decisions. The removal of just one decision can leave more room for mental space, and better productivity. By having a routine, your brain doesn’t have to work as hard and reduces stress,

They are aware of their spending habits

They live below their means, and don’t drive the nicest cars in the neighborhood. Have you read the book, “The Millionaire Next Door?” Years of research has gone into this book to study millionaires. What they found is the average millionaire doesn’t live in the biggest house or drive the fanciest car. In fact, often times the millionaire lives next door to you. These are the individuals who you wouldn’t recognize as millionaires unless you saw their bank accounts. They live below their means, and build their wealth in investments such as real estate, the stock market, and have multiple streams of income. Many times, it’s the broke people who make a good income, but overspend to live in a big house with many cars. They are house rich, but cash poor. Challenge yourself to save at least 15% of your income by paying yourself first. Then create a spending plan of needs and wants so you become in charge of your money, and it doesn’t control you. Subconsciously, you will think twice about every purchase.

8

They become successful and pay it forward

Chances are millionaires had a good mentor along the way. They surround themselves with positive, influential people, and when they succeed they pay it forward. A great mentor, Mr. Bill Walsh, Founder and CEO of Business Coaching/ Venture Capital Firm of Powerteam International, says to create so much value in other people’s life and expect nothing in return. Living by this philosophy will set you up for success, and you’ll be surprised with what you get in return. Remember, small changes over time lead to great results. Implement these habits into your life, and you will be on a great path to success!


At Next Level Physical Therapy and Performance, Inc, we believe in functional physical therapy. This means breaking your activities, whether work or play, into specific movement patterns. These patterns will be used to direct your treatment. Getting you back into your life as quickly and safely as possible is our main goal.

480.868.2696 www.nextlevelptp.com


WE STRIVE TO PROVIDE COMPLETE CARE FOR OUR PATIENTS.

Family Medicine Chiropractic Care Physical Therapy Suboxone Program Pain Management Weight loss Programs Massage Therapy At Advanced Spine and Rehab, we take great pride in providing the finest chiropractic and medical care to our patients. Below is a sampling of the different medical and chiropractic services we offer in our Mesa office.

Podiatry

PROVIDERS Michael Crismon, DC

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