Over the next couple months I’m going to show you some creative ways to have your home either make your or save you money. Today I’ll show you Equity Investing, a smart technique I’ve been using personally. It shaves thousands off my mortgage each year and takes no work once it’s set up.
Equity Investing is the process of shifting the equity in your home into an investment that pays you a monthly income. It’s a strategy that the wealthy have been using for generations to provide more income or even pay down their mortgage faster.
Imagine having your equity make extra monthly mortgage payments for you!
Here’s an example of how income equity works:
Sarah owns a home worth $550,000 and has a mortgage for $150,000. She decides to shift $200,000 of her equity into a mortgage backed investment earning 9% interest. Her cost to access the equity is 4.5% interest. Each month Sarah’s investment pays her $1,500 (minus $750 in interest payments on her equity loan). That’s a net income of $750 each month.
Since Sarah is smart and worked with me to get her mortgage, she’s able to make extra payments onto her mortgage without penalty; so she directs all $500/month onto her mortgage and saves the $250 to pay income taxes on the $750.
Over the next 10 years Sarah is able to effortlessly put additional $60,000 towards her mortgage – in addition to her regular mortgage payments! This will make her mortgage free faster and she can then spend the steady investment income at the same time enjoy not having a mortgage payment.
There is generally a 1-year minimum investment term required, but after that you are able to have the equity investment run as long as you like. When you no longer want or need it you withdraw the investment and put the equity back into your home without fees or penalties.