From Real Estate To Riches
Real estate is the single best route to getting rich in this country, according to best-selling author David Bach. And while more Americans are catching on to that trend, many don't realize there may be a better mortgage for them or that they could be saving a lot of money on their current mortgage.
Bach's new book is called "The Automatic Millionaire Homeowner," and he joined The Early Show Wednesday for on why real estate is the best investment you can make and how owning a home can help turn you into a millionaire.
Bach appears Thursday for Part Three.
He began Wednesday with what he calls the automatic millionaire mortgage approach.
"If you have got a 30-year mortgage, I don't want you to pay your mortgage for 30 years. I've got an approach that will get you out of debt in less than 23 years," he told co-anchor Rene Syler. "Go back to your bank today and you say the following words. 'I want a biweekly mortgage plan.'
"You take your mortgage payment. Let's say it's $1,000 a month, as a simple example. Instead of paying it once a month, you pay half, $500 every two weeks. When you pay your mortgage this way, you make one extra payment a year and take a 30-year mortgage and shave it down to 23 years, saving seven years on your mortgage."
Banks do charge from $5 to $10 a month for calculating the biweekly formula, and Bach says if you want to avoid those fees, you can make one extra payment a year instead, or add 10 percent toward your principal each month.
If your bank offers a bi-weekly payment plan, you can arrange to have the money taken directly out of your checking account, which avoids late fees.
Bach also talks about a home as a forced savings.
"Most Americans stay in a home at least seven years," he said. "When you put money into that principal payment, you are just building up your savings account. So when you sell your home, that equity goes with you to your next house and makes it easier to buy your second home."
Bach suggests that all homeowners take time to examine the type of mortgage they are holding.
"Many Americans have mortgages right now and they don't know what is in them," he said. "We have got hundreds of billions of dollars in adjustable rate mortgages. Pull your statement out. Find out 'When is my mortgage coming due? What's the rate going to be? What will it adjust to?' A lot of people, millions, quite frankly, have done interest-only adjustable rate mortgages. When these rates come due in 2007 and 2008, many Americans will see their mortgage payments go up by 50 percent or more."
With that information, Bach recommends that people "call their mortgage adviser and look at what's going on in the mortgage because most people, the most important decision they ever made was to buy their home but they don't really know what their mortgage is right now."
Some possibilities to consider, when it comes to refinancing, says Bach, are to "Lock the rate longer. Refinance and lock your rate right now for seven years or 10 years or even 30 years. We're still at very, very low rates. Second thing is, know your credit. Because your credit score is going to determine what your rate is when you go to refinance."
If a homeowner's credit rating has slipped, there could be bad news from the mortgage broker.
"If you go to refinance with a lower credit, you'll have a hard time getting a better rate," he said. "Pull those mortgage rates and credit scores and say, 'When does my rate adjust and if it adjusted today, what would it cost?' Sit down and have a conversation and say, 'Are we in good shape? Can we really afford this?' "
Thursday on The Early Show, Bach will be back with more tips on how owning a home can help you become a millionaire.
Check out David Bach's Web site for information about the author and to see whether he will be speaking in a city near you.
To read an excerpt from "The Automatic Millionaire Homeowner," click here.
Copyright 2009 CBS. All rights reserved. Bach's new book is called "The Automatic Millionaire Homeowner," and he joined The Early Show Wednesday for on why real estate is the best investment you can make and how owning a home can help turn you into a millionaire.
Bach appears Thursday for Part Three.
He began Wednesday with what he calls the automatic millionaire mortgage approach.
"If you have got a 30-year mortgage, I don't want you to pay your mortgage for 30 years. I've got an approach that will get you out of debt in less than 23 years," he told co-anchor Rene Syler. "Go back to your bank today and you say the following words. 'I want a biweekly mortgage plan.'
"You take your mortgage payment. Let's say it's $1,000 a month, as a simple example. Instead of paying it once a month, you pay half, $500 every two weeks. When you pay your mortgage this way, you make one extra payment a year and take a 30-year mortgage and shave it down to 23 years, saving seven years on your mortgage."
Banks do charge from $5 to $10 a month for calculating the biweekly formula, and Bach says if you want to avoid those fees, you can make one extra payment a year instead, or add 10 percent toward your principal each month.
If your bank offers a bi-weekly payment plan, you can arrange to have the money taken directly out of your checking account, which avoids late fees.
Bach also talks about a home as a forced savings.
"Most Americans stay in a home at least seven years," he said. "When you put money into that principal payment, you are just building up your savings account. So when you sell your home, that equity goes with you to your next house and makes it easier to buy your second home."
Bach suggests that all homeowners take time to examine the type of mortgage they are holding.
"Many Americans have mortgages right now and they don't know what is in them," he said. "We have got hundreds of billions of dollars in adjustable rate mortgages. Pull your statement out. Find out 'When is my mortgage coming due? What's the rate going to be? What will it adjust to?' A lot of people, millions, quite frankly, have done interest-only adjustable rate mortgages. When these rates come due in 2007 and 2008, many Americans will see their mortgage payments go up by 50 percent or more."
With that information, Bach recommends that people "call their mortgage adviser and look at what's going on in the mortgage because most people, the most important decision they ever made was to buy their home but they don't really know what their mortgage is right now."
Some possibilities to consider, when it comes to refinancing, says Bach, are to "Lock the rate longer. Refinance and lock your rate right now for seven years or 10 years or even 30 years. We're still at very, very low rates. Second thing is, know your credit. Because your credit score is going to determine what your rate is when you go to refinance."
If a homeowner's credit rating has slipped, there could be bad news from the mortgage broker.
"If you go to refinance with a lower credit, you'll have a hard time getting a better rate," he said. "Pull those mortgage rates and credit scores and say, 'When does my rate adjust and if it adjusted today, what would it cost?' Sit down and have a conversation and say, 'Are we in good shape? Can we really afford this?' "
Thursday on The Early Show, Bach will be back with more tips on how owning a home can help you become a millionaire.
Check out David Bach's Web site for information about the author and to see whether he will be speaking in a city near you.
To read an excerpt from "The Automatic Millionaire Homeowner," click here.
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