Now that we’ve stated our purpose , let’s get started.
You’ve seen how many mortgage options a home buyer has these days. If the banks made the same amount of money on every mortgage loan then truly how many options would we have as borrowers?
But we don’t have just one. There are several to choose from.
That then begs the question, do the banks have our best interests at heart? I believe most of you reading would say no. More like, HECK NO!
So, if they don’t have our best interests at heart and they offer us so many different options that provide various profit margins for them then maybe, just maybe, we should do a little math. But how many of you have done so? More importantly, how many of you have financial professionals who have done so in your life?
If you think it’s only about the amount of interest you pay (i.e. Ramsey) you are hugely mistaken. Check out his own words on his website and read the “Want More Proof?” piece.
Our guess is when you chose your mortgage you simply took the product that:
- provided you the lowest rate,
- provided the payment structure that satisfied your budget,and
- satisfied your plan to pay the house off early.
If you followed Dave Ramsey’s advice then you took the 15-year mortgage. Unfortunately, you chose the one mortgage that makes the most money for the bank of all options available to you. Hey, at least your bank has profited from your choice…heck you might have even scored a toaster.
What if you missed a crucial piece to this plan? Would you want to know about it? You’re reading this so you’re at least interested or you’re secretly hoping that I make myself look like a fool. I mean really, can I back up the statement that 15-Year mortgages are a dream to the banker? Yep, and I will.
We educate on what we call financial transfers. This is money that you’re losing unknowingly and unnecessarily and the largest transfer of wealth, next to taxes, anyone will ever encounter is the purchasing of a home and the mortgage associated with that transaction. It is part of the traditional American dream. It’s also the most misunderstood.
As promised, let’s take a quick quiz to see how you’ve understood mortgages so far. Ready? Go with your first reaction.
TRUE or FALSE:
- A large down payment will save you more money on your mortgage over time than a small down payment.
- A 15-year mortgage will save more money over time than a 30-year mortgage.
- Making extra principal payments saves you money.
- The interest rate is the main factor in determining the cost of a mortgage.
- You are more secure having your home paid off than financed 100%.
Imagine if math, not some theory or new “latest and greatest” product, but math proves that each of these statements are actually false. Would you think it was worth your time to learn just how that’s the case? It’s certainly worth it from a financial standpoint.
If you’re a Dave Ramsey follower then you certainly answered “True” for each one of the above statements. Soon you will understand why I have such a hard time with what he teaches and specifically that churches continue to hold his classes. My fellow Christians need to know the truth.
I will say this though about Ramsey: what he teaches about snowballing debt and creating a savings cushion is right on the money and very much needed in today’s “spend now and pay later” culture. I just wish he stopped there. It’s his instruction on mortgages and investments that are incredibly off the mark and unfortunately it’s these two topics where people lose the most money.
Stay with us, we’re about to dig in the heels…remember the Bigger Box?
Kelly O’Connor – firstname.lastname@example.org