How to Grow Your Down Payment?

We’ve talked about where to find your hidden down payment and also side gigs to earn extra money.

One thing we still need to explore is how to GROW your down payment.

It’s one thing to work extra hard to find that extra chunk of cash, but it’s another to figure how to grow that chunk of cash to hasten the process of accumulation.

Beat tax and inflation

This is the Wealth Formula…the mother of all formula that every investor needs to know.

After doing all those things discussed about finding that extra chunk of cash for down payment, we need to explore the rate of return.

Time you have limited control. The only thing you can do is ACT NOW!

But where you should park your money now while you save?

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Tax now

Tax now…

Brokerage account

Certificate of deposit

Checking account

Savings Account

Tax later

Tax later…

401k/403(b)

Annuity

SEP IRA

Thrift Savings Plan (TSP)

Traditional IRA

Tax never

Tax never…

Be Your Own Bank  (life insurance)

Health Savings Account

ROTH IRA

ROTH TSP

Where can you save that can give you the most bang for your bucks?

You want good rate of return to beat inflation of 3.3% each year

Related article: Is Your Money is Your Savings Account Working Hard for You? Or for Your Bank?

You want maximum tax benefits

You want safety, meaning never lose money!

An indexed universal life (IUL) insurance can provide all these benefits better than IRAs, which limits access to money before age 59-1/2, or HSA, which limits your spending only on health-related expenses.

An IUL lets you capture the upside of the stock market (gain) beating inflation each year, but avoids the down side (loss). So your down payment money grows safely and aggressively with maximum tax benefits.

Learn more at Be Your Own Bank

When you’re ready to pull the trigger to make the purchase, you can take a tax-free withdrawal, keeping your new money in the cash account to continue to grow.

How to Buy Your Perfect Homes

Buy Your Perfect Homes

Home ownership brings along the pride of being a home owner, social status, and not to mention many monetary benefits.

1. Tax breaks. The U.S. Tax Code lets you, the home owner, to deduct the interest you pay on your mortgage, your property taxes, as well as some of the costs involved in buying your home.

Related article: The Tax Benefits of Home Ownership

2. Appreciation. Ownership of real estate provides long-term and stable growth in value. While year-to-year fluctuations are normal, median existing-home sale prices have increased on average 6.5 percent each year from 1972 through 2005, and increased 88.5 percent over the last 10 years, according to the NATIONAL ASSOCIATION OF REALTORS®. In addition, the number of U.S. households is expected to increase 15 percent over the next decade, creating continued high demand for housing.

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3. Equity. Money paid for rent is money that you’ll never see again, but mortgage payments let you build equity ownership interest in your home.

4. Savings. Building equity in your home is a ready-made savings plan. When you sell your home, you can generally take up to $250,000 ($500,000 for a married couple) as gain without owing any federal income tax. That's another tax break.

5. Predictability. Unlike rent, your fixed-mortgage payments are fixed over the years so your housing costs may actually decline as you own the home longer. However, keep in mind that property taxes and insurance costs will increase.

6. Freedom. The home is yours. You can decorate and remodel any way you want and benefit from your investment for as long as you own the home.

7. Stability. Remaining in one neighborhood for several years gives you a chance to participate in community activities, lets you and your family establish lasting friendships, and offers your children the benefit of educational continuity.

Hidden Down Payment

Gift Money

No or Low Down Payment Home Loans

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0% Down Payment

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Low Down Payment

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HomeReady Loan

Don’t Waste Your Money on Mortgage Life Insurance

First of all, what is Mortgage Life Insurance?

Mortgage Life insurance is an insurance policy designed specifically to pay off your mortgage in the event that you, the mortgage borrower, die before the mortgage is completely paid off.

Don’t confuse mortgage life insurance with private mortgage insurance or PMI. They are different animal. But both are equally hurtful to your wealth accumulation plan.

Mortgage life insurance are somewhat similar to traditional life insurance, but different in very significant ways. Both traditional life insurance and mortgage life insurance can provide a means of paying off your mortgage. With either type of insurance, you pay regular premiums to keep the coverage is in force.

A traditional life policy pays out death benefit when the borrower dies. But a mortgage life insurance policy doesn’t pay out unless the borrower dies while the mortgage itself is still in existence. And the death benefit goes to the mortgage lender, not the family members as in traditional life insurance.

Why would you buy life insurance to pay money to your mortgage lender, and not your family?

With mortgage life insurance, your mortgage lender is the beneficiary of the policy instead of beneficiaries you designate. When you pass away, the death benefit pays out to your lender to pay off the balance of your mortgage, so you family does not have to worry about the mortgage.

Well, it’s true that mortgage is taken care of for your family. But wouldn’t it be better for your loved ones to receive the death benefits and decide how they want to use that money and decide whether to pay off the mortgage. There may be more pressing needs than paying off the home, such as final expenses, private school or college tuition, etc.

Related article: Why You Need Final Expense Insurance?

Let’s look at mortgage life insurance more closely.

There are two basic types of mortgage life insurance: decreasing term, where the size of the policy decreases as the balance of the mortgage is being paid down until both reach zero; and level term, where the size of the policy does not decrease.

With a level premium, your premium stay the same for the duration of the policy. This feature sounds great – until you realize that while you’re paying the same premium, your coverage is shrinking as you pay off your mortgage over the years, which also means the potential payout decreases as well.

Some insurance company offer to return your premium if you pay off your mortgage before you die. Does this make up for the fact that your coverage declines although you keep paying the same amount? Not really.

After 15 or 30 years, when your mortgage is paid off and you get your premiums back, they’ll be worth far less because inflation will have eroded their value.

You also will have lost the opportunity to invest what you saved from purchasing cheaper life insurance instead of mortgage protection insurance. That’s 15 or 30 years of potential compounding returns down the drain.

Related article: How to Make Money Work for You

Traditional life insurance is often more affordable and allows you to name your children or spouse as the beneficiaries rather than the mortgage company.

The premium of the mortgage life insurance is usually lumped into the home loan, which means you are paying finance charges on the premium, which is already expensive.

Also, a mortgage life insurance stays with the house and it is not transferable. Now you’re stuck.

Basically, a mortgage life insurance is a waste of money. Any traditional life insurance (whether term or permanent) can offer much better level of protection for considerably smaller premiums.

A traditional life insurance maintains its death benefit value throughout the lifetime of the policy, and the death benefit pays out to your family whether or not your mortgage is paid off. It gives your family option to pay off the mortgage or use the money for more urgent things. And if the mortgage is paid off when you pass, that’s even better, your family can have all the money to use for whatever is important.

Mortgage life insurance is extremely profitable for mortgage lenders and/or insurers, but totally obsolete to borrowers. Remember, there are two lifespans to consider – your lifespan and the mortgage’s.

Mortgage protection insurance companies might try to convince you that you need their product in addition to life insurance. They’ll tell you that paying off the mortgage will eat up a major portion of your life insurance proceeds, leaving much less for your survivors to meet their basic living expenses.

If you are concern you don’t have enough life insurance, you should buy more. It will likely cost less to increase that coverage than to purchase a separate mortgage protection policy.

If you cannot qualify for traditional life insurance because of health reason, you would still be better off with a no-medical-exam (also called “guaranteed issue”) term policy with level premiums and a level death benefit. These policies cost a bit more, but at least you and your family will be protected.

You should consider mortgage life insurance only as a last resort.

Related article: Protect Your Home with Life Insurance

Why Private Mortgage Insurance Sucks?

If you're a home buyer, avoid private mortgage insurance like a plague.

Private mortgage insurance is an insurance policy that protects mortgage lenders against losses that result from you defaulting on a home mortgage, dies, or is otherwise unable to meet the contractual obligation of the mortgage.

It is usually required from mortgage borrower if their down payment is less than 20 percent

That’s right, you pay the insurance to protect your bank.

Private mortgage insurance may come with a typical “pay-as-you-go” premium payment, or it may be capitalized into a lump sum payment at the time of mortgage origination.

As an alternative to private mortgage insurance, some lenders may offer a “piggyback” second mortgage, which serves as or part of the down payment to avoid private mortgage insurance.

This option may be marketed as being cheaper for the borrower, but that doesn’t necessarily is true. Always compare the total cost before making a final decision.

Another alternative is “lender-paid insurance”, which sounds so much more reasonable. With lender-paid insurance, you are required to put down at least 10 percent as down payment.

That’s still a lot better than you paying for private mortgage insurance, which can add up to a lot of money, which could have been use to pay down the principal.

Not every lenders offer lender-paid insurance, so you have to shop around and ask, especially mortgage brokers. You can always get better deals from mortgage brokers than big banks.

Once you’ve paid off some of your loan and/or your equity in your property has increased to where your loan is less than 80% of your property value, you may be eligible to cancel your mortgage insurance. Once the mortgage insurance is cancelled, you will stop paying the monthly premium, which you can now use that as additional payment to the principal and pay off your mortgage a little bit faster.

Related article: Pay Off Your Mortgage in 7 Years

The private mortgage insurance does not cancelled automatically when your loans reaches less than 80% of your property’s value. You have to initiate the cancellation. So check your mortgage and property tax assessment value at least yearly.

Related article: Don’t waste your money on mortgage life insurance

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If you’re a home buyer, avoid private mortgage insurance like a plague.

Private mortgage insurance is an insurance policy that protects mortgage lenders against losses that result from you defaulting on a home mortgage, dies, or is otherwise unable to meet the contractual obligation of the mortgage.

It is usually required from mortgage borrower if their down payment is less than 20 percent

That’s right, you pay the insurance to protect your bank.

Private mortgage insurance may come with a typical “pay-as-you-go” premium payment, or it may be capitalized into a lump sum payment at the time of mortgage origination.

As an alternative to private mortgage insurance, some lenders may offer a “piggyback” second mortgage, which serves as or part of the down payment to avoid private mortgage insurance.

This option may be marketed as being cheaper for the borrower, but that doesn’t necessarily is true. Always compare the total cost before making a final decision.

Another alternative is “lender-paid insurance”, which sounds so much more reasonable. With lender-paid insurance, you are required to put down at least 10 percent as down payment.

That’s still a lot better than you paying for private mortgage insurance, which can add up to a lot of money, which could have been use to pay down the principal.

Not every lenders offer lender-paid insurance, so you have to shop around and ask, especially mortgage brokers. You can always get better deals from mortgage brokers than big banks.

Once you’ve paid off some of your loan and/or your equity in your property has increased to where your loan is less than 80% of your property value, you may be eligible to cancel your mortgage insurance. Once the mortgage insurance is cancelled, you will stop paying the monthly premium, which you can now use that as additional payment to the principal and pay off your mortgage a little bit faster.

Related article: Pay Off Your Mortgage in 7 Years

The private mortgage insurance does not cancelled automatically when your loans reaches less than 80% of your property’s value. You have to initiate the cancellation. So check your mortgage and property tax assessment value at least yearly.

Related article: Don’t waste your money on mortgage life insurance

Free Download “Saving Your Future”

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I want to share this book “Saving Your Future” with you because the information in this book has changed my life, and I hope it will change yours too.

You might be thinking why “Saving Your Future” instead of “Saving for Your Future”? We all know we need to save for our future. But the more urgent problem is many of us may not have a future…many people nowadays live paycheck-to-paycheck and is just one paycheck away from poverty. Because of that, there is no money left at the end of the month for investing. And worse, many carries never-ending credit card debts, mortgages, student loans.

So, where is your future? Can you depend on your employers for  your retirement? Do you have a pension plan? How much would you get from social security? Can you survive on your social security income? Do you have savings? Are you saving enough?

This book contains a lot of simple financial strategies. You don’t have to read from front to back in sequence. You can look at the table of content and jump straight to the chapter that best fits your financial goals.

Consider signing up for the Financial Strategies Workshops in Honolulu, HI. There is no substitute for learning in a fun and interactive environment with experienced financial advisors.

Free Personal Finance Workshop

Once in a while, World Financial Group, the company I'm affiliated with, host a free workshop for anyone interested in learning how money works, retirement planning, wealth building, income and asset protection, etc.

Here's your opportunity.

The event is FREE and there is no product to sell. Just pure information exchange.

Hope to see you there...

25 Feb 2017, Saturday from 10am - 12pm. Light refreshment to follow.

1360 S. Beretania St. Ste. 205, Honolulu, HI 96814 - free parking on lower level.

Contact me to RSVP: call or text 808-387-3422 or email perfecthomeshnl@gmail.com

Free Personal Finance Workshop

Be Your Own Bank

Exploiting the living benefits of a cash value life insurance

The cash value life insurance is a little known secret for real estate investment or anyone planning their retirement.

The indexed universal life is the best investment vehicle. Why?

Cash value life insurance, as in it's name, is life insurance with cash value. Similar to a savings account associated with your life insurance. The difference is this "savings account" grows tax-free as part of the life insurance.

This is the bonus for real estate investors. Short on cash. Borrow from your cash value account interest free. How does that sound?

Let me clarify this a little. Every cash value life insurance policy is different. Most charge interest rate for borrowing. But some charge more and some charges less. The one that I have, charges 0.75% for first 1-9 years, then 0% after 10 years. Contact me to find out more.

The other thing is when you borrow money from your cash value, you'll not taking money out from your account, you're borrowing against your cash value, which is being used as a collateral for your loan. This is an added bonus, because your cash continues to grow tax-free while you're enjoying your extra cash interest-free.

Another bonus with borrowing from a cash value life insurance is that you don't have to repay your loan it you don't want to. How? Good questions!

Remember it is a life insurance policy. So it also has a face value. When you die, the insurance will pay off your loan with your policy's face value.

Isn't this a great idea? People always think that life insurance only benefit the family after you diet, but with a cash value life insurance, you got to benefit from it too before you die.

Need help with retirement planning?

Many wealthy people use a cash value life insurance for their retirement planning. Say you pay your insurance premium every year and contribute to the cash value at maximum level every year for thirty years, and never taken any loans out. Now you're 65 years old, and ready to retire. By now your cash value should have grown significantly over the years TAX-FREE.

Now you can stop paying premium, because your cash value is be used to pay your premium, and at the same time pay you money for the living expenses. Again, this pay-out is given in the form of a loan, so the cash value continues to grow while you enjoy your retirement, and you do not pay tax. Remember, Uncle Sam taxes earnings only when you withdraw it, but not loan interest.

Read Do You Have the Retirement Plan to Retire Rich?

With that all said, you might be wondering what's the best cash value life insurance?

I would have to say hands down the indexed universal life. This is like the Rolls Royce of life insurance. What make this particular policy so special is that your cash value never loses money. The one that I have tracks the indexes of Europe, Hong Kong and US - Euro Stoxx 50, Hang Seng and S&P 500.

As investor, you probably knows the risk of investing in stock markets - the ups and the downs. In this product, there is a floor of 1%, which means, even if the stock market tanks, I still get 1% return on my cash, and the ceiling is 13.75%, the maximum return I can get. I think this is pretty good deal because when you lost 5% in the stock market, you need a 10% return to regain what you lost. With this policy I have no loss, only gains.

Easy and Simple Marketing Strategies to Sell Your Home Fast

These are tried-and-true strategies that will sell your home fast.

1. The most important strategy is list your property on the Multiple Listing Service (MLS). If you want to list your property on the MLS, you’ll have to use an agent. However, I recently discover a new service for home sellers who want to do for-sale-by-owner. Check out owners.com. You can list your property on your local MLS for a reasonable fee through owners.com who has a license to list your property on the MLS for you.

Why do you want to list on the MLS? Because when a property is listed on MLS. It is automatically listed in other real estate websites as well, such as, Trulia, Zillow, Redfin, Google, etc.

Why is that important? Today, more than 95% of homes buyers find their homes online. Therefore, it is important to have an internet presents to be in front of as many potential buyers as possible. Furthermore, MLS are geared more toward retail home buyers, who are looking for their own homes, and are willing to pay more for properties.

2. Write an appealing listing description. In a MLS listing, there is a small space for agent to write a brief description of the property. You, as a home seller, assume your real estate agent is competent is writing an award-winning and catchy description that will get your property multiple offers in no time, right?

You are so wrong…You’ll be lucky if your real estate agent writes anything at all, let alone writing something appealing.
Whatever your agent is writing make sure they don’t use the following words or phrases in the listing. This list of words and phrases came a 3-year study in Dallas’ market and are found to be associated with lower sales price and longer days of markets.

Avoid these words or phrases:

“motivated sellers” - lower sale price and longer listing period.
“good buy” - lower sale price
“vacant” - lower sale price, assume can offer less. Not need to.
“repairs” - longer time on market and lower sale price. However, “updated” sold for higher price.
“good location” - lower sale price

Instead, focus on using the listing description to draw out emotion and help buyers to visualize living in the property. People buy for emotional reasons and justify with logic later.

3. Including a link to a video tour of your property is the simplest thing that anyone can easily do. Almost everyone has a camera with video recording capacity on their smart phone. So there is almost no reason to NOT to do one. A video tour is a great opportunity to showcase the best features of the property. Remember, your listing agent is not necessarily the one who shows your property. it’s usually the buyer’s agent who shows the property, and very likely he/she is showing the buyer another 3-4 properties too. So your potential home buyers will not know all the cool features of your property.

Remember, 95% of home buyers search for their homes on the internet, a video tour will give them a very good reason to call their agent to schedule a showing at your property.

4. Price it right at the start to avoid property sitting on market for too long. When you see a property with a days on market greater than a month, the number one reason is always price.

One of the thing I see frequently on the MLS is the astronomical asking price. This intimidates many potential buyers because real estate prices are already high. Most logic behind listing high is “I’ll start high and see if anyone would buy. If not, I’ll drop the price”. And real estate agent doesn’t mind that logic and, in fact, some promotes it telling seller it’s seller’s market. Really? Or it is because their commission is tied to the sales prices…

When I see sellers start reducing price, I know this is a motivated seller, and will put in a low-ball offer.

Sometimes, home sellers worry that they priced too low and is selling themselves short. No…sales price is determined by supply and demand. If you list at a reasonable price, compared to all those overpriced listing, home buyers feels they’re getting a deal, and you’ll end up with multiple offers, which creates competition. You know how competition makes people wants to win, and likely offer to buy at a price higher than your asking price.

When you list at too high of a sales price, you risk not getting any offer, then your property sits on the market. The longer it sits on the market, the less interest you’ll get from home buyers because they’re concern that something is wrong with the property that’s why it still not sold.

Another reason why listing high to start is a bad move is because when you first list your property on MLS, that listing is distributed to other sites. But when you reduce the price, MLS does not update other sites. And you end up missing many potential buyers because your property will be out of many buyers price range.

Pricing too high not only cause your property to sit on the market for too and ending selling for a lot cheaper, but it also end costing your more considering all the expenses you have to pay on an empty property.

5. Your first offeror (the person who put the offer) is always, always, always your best, assuming this person has the ability to purchase with cash or mortgage. This offer may not be the best offer. First offer is usually lower than what they are willing to pay, or the terms needs to be worked out. The reason why your first offeror is the best is likely because these individuals has been on the market looking for a specific property, and when yours show up on MLS, they spot it, they want it and put an offer right away.

Remember, no matter how good your real estate agent, or he/she is your cousin or neighbor, these people have different motivation than yours as a home seller.