If you ask the average American what the single most significant financial purchase he/she will make in their lifetime is, most will answer, “My home.” Is that answer correct? No. The correct answer would be, their mortgage.
Integral to the whole mentality of the proverbial “American Dream,” at least for the “successful” middle class, is home ownership. This has been considered a financial success gauge of sorts for so long that potential first time home buyers will do just about anything to “qualify” for that first home loan or mortgage and they feel so jubilant when they succeed. Little do they realize they are being greatly taken advantage of. They are actually being defrauded in some ways. They are paying interest so excessive that even the word “excessive” is a huge understatement. Let us explore the banking industry a little and get to the bottom of what is really going on, get to the reality, versus the illusion the banks have so artfully created.
You might find it interesting to discover that the word, “mortgage,” Mort-Gage, means death debt. Not so warm and fuzzy sounding all of the sudden is it? Anyway, if you have a standard 30 year mortgage, as I mentioned earlier, you are being greatly taken advantage of. That 5.9% interest rate sounds pretty decent right?? Smoke and mirrors. If you never refinance, by the time you pay off that loan in 30 years you will have paid for your home 2 and a half to 3 times. That is significantly more than 5.9% of balance you borrowed is it not?
Let’s put that in to real numbers. We will be a bit more closer to the average though and use a 7.5% interest rate. A $175,000 mortgage at 7.5% average interest rate amortized over 25 years equals an actual indebtedness of $384,000 (principal and interest). These are after tax dollars! If you are in a 40% tax bracket, you will have to earn a whopping $640,000 before tax in order to pay off the $175,000 mortgage. $640,000 minus $175,000 equals a $465,000 difference.
But actually, on average, Americans refinance every 4.9 years. So really, few rarely stay in a loan anywhere near the standard 30 year term anyway. And since mortgages are front end loaded on the interest, you will have paid very little on the principle in 5-10 years, most of your equity being achieved through appreciation of the homes value. In fact, in 20 years you will still owe 60-70% of your principle. And the bank’s gouging of your wallet is far from finished. Consider this.
The bank can loan up to 9 times what it has on deposit. What’s the significance of this? They only had to have a little over $22,000 on deposit for example, to loan $200,000. How is this possible? Where did the other $178,000 come from? Did it just appear from nothing? As a matter of fact it did.
That money literally sprang into being when they transferred it to your account or wrote you that check. So the bank ends up making two-and-a-half to three times the amount of money they never loaned you in the first place, and they charged you almost all of that interest on nothing. So you see, all this interest the bank is receiving, all these interest payments, mostly paid in the front end of your home loan, and virtually every other loan out there, amounts to rivers of interest payments on nothing! If you are the one loaning the nothing money, that’s not too shabby. How much easier and risk free can making a fortune get? You didn’t have to risk a penny, and yet you get to collect interest! Earning money from “money” created out of thin air. How is that different from counterfeiting? How is that different than me printing money on my money machine in my garage, loaning it to you, and charging you interest on it. The only difference is that they can do it “legally,” and I would go to jail for it.
Any interest, no matter how little, charged on nothing, I would have to call excessive! Wouldn’t you agree? And if most of us refinance every 5 years, their interest on nothing is compounded again, because what you owe them never really goes down much, in fact in many cases it would go up. Makes you want to go to your mortgage lender and have a talk with him doesn’t it? But do you really think they are going to tell you how to cut their profits? I don’t think so. So is there anything you can do??
What if you could take your current mortgage payment and cut it in half? Say you have a $1000 house payment. What if you could take $500 of that money that was previously going to the bank as excessive interest on money they created out of nothing, and instead invest it at, for now let’s just say a 10% annual return.
How much would you have at the end of 1 year, 2 years, 5 years and 10 years, and 16 years with annual compounding?
Answers:
1 Year: $6,833
2 Years: $13,827
5 Years: $39,496
10 Years: $103,536
16 Years: 202,246.86
So in just about half the time you own your house outright, you’re no longer in debt to the bank, plus you have the additional equity of 16 years of appreciation. And this is at only a 10% annual return. Since on a standard 30 year fixed rate loan you, on average, still owe about 76% of the principle after 15 years, not only do you now own your home, but you have saved yourself $152,000 in interest on legally counterfeited money, that you would otherwise have had to pay to the bank over the next 15 years.
Even if you did not invest your monthly increased cash flow, but instead used it to pay off credit cards, take vacations, whatever, and refinanced every 5 years to collect the idle equity in your home, suddenly your home has become a cash flow tool, an asset, instead of a liability. However, if you are willing to invest, you have even more options.
Documented by Standard & Poors of the S&P 500 Index, there are investment funds out there earning from 30% to as much as 400% per year! There are funds earning 10% and more per month! Why haven’t you ever heard of these types of investments? Even the majority our financial professionals and advisors would laugh in your face if you tried to tell them you could get these types of returns. Yes, the big bankers gouging of your hard earned money continues.
They have intentionally been part of a misinformation campaign for the better part of a century to make sure that you and the general public do not know about these investments. For example, I recently saw a commercial on television. It portrayed a man holding a scalpel to his chest and talking to a heart surgeon on his cell phone. He was saying to the surgeon, “Shouldn’t you be doing this?” The narrator then chimed in, “You wouldn’t try to perform your own heart surgery would you? Than why would you try to manage your money? Let the experts at ABC company etc..” You see? They do not want you trying to manage your own money and spend who knows how many millions of dollars every year in advertising trying to convince you to let them do it. Why? Because in addition to charging excessive rivers of interest on non-existent money, they want your money with them so they can pay you the measly 1.1% to, if you are fortunate, 5% trickle down interest, while they make 30% to 400% on that same money. Can you imagine the affect on their bottom line if we all started taking our money out of the bank and investing it at these high returns on our own? Wouldn’t you love to be able to cut them out of the picture and make 30% to 400% returns on your money? Or 10% to 20% compounded monthly?
To demonstrate the power of compound interest at these levels, let’s take that same example we discussed earlier and figure it at only an 80% annual return. We won’t even get into the 100% to 400% levels.
So again we will take that $500 previously going to the bank as excessive interest on money they created out of nothing, and instead invest it at 80%.
How much would you have at the end of 5 years and 10 years, and 15 years with annual compounding?
Answers:
5 Years: $241,417.00
10 Years: $11,842,339.00
15 Years: $569,305,174.00
In 16 years you would be a billionaire from a $6000 yearly investment or $500 a month. And again that is not even taking into consideration the 100% to 400% returns. Realistically of course nobody would ever have that much capital in one place, but these numbers certainly illustrate the power of compound interest.
But this is essentially what the big banks are doing with your money. Multiply all that interest on nothing by every car, every house, every factory, every restaurant, every farm, every high-rise office building, etc..etc..! Then also factor in all the money from the high yield investments they don’t want you to know about, billions per year invested at those returns as opposed to the $6000 per year you invested and still achieved billionaire status with in only 16 years, and you have absolutely mind boggling wealth, mostly earned through deception and propaganda.
I don’t think you have any reason to feel guilty about pulling your money out of your savings and checking accounts with the big banks. For your daily financial needs, put it instead in a small local bank or community credit union that helps to reinvest into your community. And immediately get educated financially about how you can invest in controlled risk investments earning 30% to 400%, as well as the rest of the financial secrets of which I have only scratched the surface of here. Fill out the paperwork right away to see if you qualify for the 1% payment option loan that we can get you access to, in addition to 3 other very unique mortgage programs the large banks would love to do away with. Take that increased monthly cash flow and invest, invest, invest.
Yes, armed with the right knowledge, you can turn your mortgage into an asset instead of a liability. Your home can be a cash flow tool working for you instead of you working hard to pay your mortgage. You can use your mortgage to accelerate and finance not just a great retirement, but an amazing one, in a few short years, without increasing your monthly expenditures and virtually no money out-of-pocket to get started. Why would anyone with a mortgage not want to do this?
However, what about the person without a mortgage to refinance? Or what about persons without a healthy enough credit score to finance a home period?
The average working man/woman pays from $7,000 to $10,000 a year in income taxes. What if you could legally and lawfully recoup most if not all of that tax burden? You now have more to invest annually than the individual saving $500 a month on their mortgage. Once again, with the right knowledge, a huge percentage of the population can do this. And if you are in a situation where you can utilize both of these strategies, how quickly could you achieve your financial freedom?
In conclusion, armed with this knowledge, just about anyone can achieve financial freedom for themselves and their family. The key is knowledge. People spend thousands, tens of thousands, even hundreds of thousands of dollars on education. They start college funds for their children when they are infants and save for almost two decades for that education. Then that same person balks, hesitates to spend just a little, on an education that can enable them to obtain true freedom. Financial freedom, time freedom, retirement freedom, freedom from stress, as well as personal privacy and sovereignty. Sadly most persons are so conditioned by the system that even at their own peril, will never act to unplug themselves from it. Hopefully, you are not that person. If you decide to take action, you can beat the banks. Call or email me anytime for more information.
Best Wishes in all your worthwhile endeavors,
R. Wayne Wood.
(541) 677-9055
wwayne2@gmail.com
R. Wayne Wood is an independent consultant for a comprehensive financial education package as well as for international investment and financial seminars. He lives in Roseburg, Oregon.
