|
What Will You Take For A Dollar?
By David Wilding
The other day I sat in a meeting listening to a
young man extol the virtues of owning real estate.
Much of what he said was true. However two things
made me sit up and take notice. I couldn't help but
comment.
First, he said the interest on your home loan was
tax deductible, so the government underwrites your
house payment. I asked the amount the government
pays him. He said they didn't pay him anything.
They allowed the interest on his home loan to be
deducted from his taxable income.
Assuring him I didn't want to be nosey, I asked
what the deduction meant to him. “Twenty-eight
percent of the interest paid, I save on taxes,” was
the reply. "So, you get to keep 28 cents for every
dollar in interest you pay?" Eagerly he responded,
"YES."
He didn't see the problem with the math. I decided
to help him out. I took some change from my pocket
and placed 28 cents on the table. I asked if he would
give me a dollar for the coins. Before he could
answer, I sweetened the pot. I put a total of 56 cents
on the table. I said, "I'll double the amount Uncle
Sam gives you. I'll give you 56 cents for every dollar
you can scrape together." He didn't seem too excited
about my idea. He understood the demonstration.
"Pay off the mortgage." I told him.
But he wasn't through. He mentioned, “The
property was going up in value.” I asked his age,
and he told me 30. I then asked, how well he
remembered the early 1980's. He didn't.
I told him real estate doesn't go up in a straight
line, and on occasion it goes down. I told him I
bought a home in the spring of 1980. Almost
immediately the real estate market went flat. Five
years later if I sold my home I felt certain I would
have owed money to the bank at closing. We waited
10 years before the market started to move up.
Just recently the market hit another bump in the
road. In our area prices dipped 3% in the past year.
With easy money and low down payments, many
new buyers find themselves upside down in their
mortgages. Many people, who have a home equity
loan up to or even exceeding the value of the
property, find themselves in the same boat.
Did he understand the moral? Yes, he did. Borrow
as little as possible, pay it off as quickly as you can.
The goal of living debt free is attainable . . . unless
you want my 56 cents.
(c) 2004 David Wilding About the Author David Wilding has for the last ten years worked with groups and individuals to help rid them of personal debt. Visit his site http://www.debtattack.com for other ideas to take care of your debt.
Article Source: http://www.simplysearch4it.com/article/689.html
If you wish to add the above article to your website or newsletters then please include the "Article Source: http://www.simplysearch4it.com/article/689.html" as shown above and make it hyperlinked. |
Some other articles by David Wilding | |
| |
|