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Now's your chance.

Make meaningful improvements to your finances every week.

Now's your chance.

Make meaningful improvements to your finances every week.

The Underwater Mortgage Escape Plan

underwater-mortgage

Are you stuck with a mortgage that is under water?  We’ll craft an escape plan so you can save money and move on.

An underwater mortgage means the balance remaining on the mortgage is higher than the fair market value of your home.  In other words, you owe the bank more money than your home is worth.

A lot of people found themselves in this situation when the economy crashed in 2008.  Even at that time, interest rates were lower than you will generally average in the market.  And mortgage interest is tax deductible.  Money tied up in a house is inaccessible.  You can pull money out of the market and have cash in hand within a few days.

If you’re underwater, don’t overpay on your mortgage.  You’re only tying up more money.  Invest that money and get your average 7%.

Give some thought to doing what Matt did when he found himself underwater.  He moved in with his brother, paying a very low amount of rent and rented out his condo.  In some cases you can get more in rent than what you are paying for your mortgage.  You just need a friend or relative willing to give you cheap rent.

A big housing bust like the one we had in 2008 doesn’t occur very often.  If you can afford your mortgage payments, hold onto the house.  Eventually you will be above water and can sell the house if you decide to.  And maybe live in an apartment for a bit.  Owning a home is not all it’s cracked up to be and not necessarily still a part of the “American Dream.”

Show Notes

Mint:  Track your spending.

Betterment:  The easy way to invest.

Vanguard:  Among the lowest fees in the industry.

 

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  • Jason Wesson

    Hi there LMM! My name is Jason, I’ve been listening to your guys’ podcast for the summer as I’ve just graduated from college and realized that I never got the education I needed to maintain my personal finances. Anyways, this podcast episode made me begin to think of how I would be paying off other debt, specifically student loan debt. I have about $75,000 in student loans, most of it being federal, thankfully.

    I was thinking about simply working my ass off for a few years and try hammering away at the monstrous debt. I’d start with the two private loans I have since I just don’t want to look at them, and then do the stacking method with the federal loans.
    However, in thinking about the ways to pay off a mortgage by investing into a Vanguard or Betterment, I was wondering if I should perform the same method on student loans. Say that I only pay off a little over the minimum payment for my loans, and invest the rest of the money into a fund of my choice for 5-10 years: do you guys think it’ll perform the same function as you suggested with being underwater in mortgage?

    I honestly think you guys are a great source to begin to understand investing and finances, and I hope you guys gain more success over the coming years!

    Jason