WHEN INTEREST-ONLY IS ONLY IN YOUR BEST INTEREST

It’s no secret that selling a home right now is not easy but, for many of us, that doesn’t change the necessity of doing so. When your real estate goals have changed, your mortgage should change with it.

When you are planning on cashing in on your home, it no longer makes sense to continue to pay principle reduction payments to your lender. You are simply giving them money that you hope to get back as soon as your property sells. That money comes with no return on it, at least not with the current rates of real estate appreciation.

An interest only loan only requires you to pay only interest to the lender. Principle payments are optional. While these loans are eyed suspiciously by many, realizing their appropriate uses and circumstantial advantages provides an opportunity for a bounty equal to your ability to capitalize on it. Instead of putting money into a frozen asset in hopes of getting the same amount back at a date and time out of your control, you can ask yourself, “What else could I do with this money?”

Every month I talk to at least one person who needs life insurance but has to delay the financial protection of a life insurance policy because of budget constraints. Most of my clients admit that they could use more coverage. Does anyone have an IRA or 401K that could use an extra contribution? Anyone feel ready for retirement? If nothing else, isn’t it better to have that money liquid in a savings account? Then, if a need arises, you can access it.

Check the rear view mirrors of your hard earned money for the opportunity cost of where it is being tied up. Freeing up dormant money in an illiquid asset can have a benefit for everyone depending on your needs and your knowledge of alternative options.

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