House Hunting Season


The bees’ll buzz. Kids’ll blow dandelion fuzz … and people will look to buy a new house in Suummmmerrrrr! I live in Michigan and my daughters have made me watch “Frozen” over ten times, so I thought a quote from Olaf’s song was appropriate. It’s that time again – when people give in to their itch to put the house up for sale and upgrade their castles!

Kari Hartley, Owner of Remax Town & Country in Flushing said, “May through September accounts for over 60 percent of market sales in Genesee County. We should see a gain in inventory in the next 30 days. With interest rates still so low, this is a prime time to be a buyer in the market.”

That said, I want to divulge a secret that is very much related to housing and could end up saving a My City Magazine reader thousands of dollars. It all has to do with the financing of your mortgage. I know that I touched base on this last year, but I cannot express its importance enough. The secret I refer to is the power of the 15-year mortgage vs. the 30-year mortgage. Many times I have heard, “mortgage debt is good debt … you get to write off the interest.” The only group that benefits from mortgage debt is the banks that offered it.

Strictly by the numbers

If you look at the numbers, it’s clear. For example, if you have a $200,000 30-year mortgage at four percent interest and don’t try to pay it off early in order to get a tax break, you’ll have paid roughly $135,000 in interest alone at the end of the term! In all, you will have paid $335,000 for your $200,000 house. Does the government benefit? No. They lose revenue because of the mortgage tax credit. Does the homeowner benefit? Not at all! The homeowner pays nearly double for their house! Again, the only group to benefit when a mortgage goes full-term is the bank that holds the debt. I wonder if banking lobbyists have anything to do with this longstanding tax deduction, since they alone reap the profit.

Let’s examine another option for this loan. You take out the same mortgage with the same interest rate but decrease the term to 15 years. True, your payment goes up from roughly $960 to $1,400 a month; however, you end up paying only $66,000 in interest. When the house is paid for in 15 years as opposed to 30, you saved nearly $70,000 of hard-earned cash. Let’s say you now take that $1,400 payment and invest it for retirement or savings accumulation for the next 15 years. Growth in a moderate portfolio with $1,400 per month at seven percent for 15 years would amass to $443,747! So after 30 years, you could not only be free of a mortgage but could potentially have money saved. What an amazing difference!

So, as you are out perusing the inventory for your castle upgrade, make sure you see if you can’t work the 15-year mortgage into your budget. It will be far worth it in the end. ♦

800.338.4586 The Durant 607 E 2nd Ave., Ste. 100 Flint, MI 48502 Securities offered through Sigma Financial Corporation, member FINRA/SIPC. Investment advisory services offered through SPC, a registered investment advisor. OLV Investment Group is independent of Sigma Financial Corporation and SPC.


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