In this series, I outlined several points considering the Smith Manoeuvre strategy. I think that even many people think that there is a huge risk to leverage against your property; The Smith Manoeuvre does not implicate much risk. Any type of risk is related to your own concept and perception of what is risky. There is nothing real about a risk as it relates to a possibility of something happens in time. Risks are not real. Therefore, if you change your perception, if you play around with your mind and your childhood concepts, you will fin out those risks related to the Smith Manoeuvre are not that bad.
In todayâ€™s post, I suggest we change our perception of our own property for a few minutes. Imagine that you never bought this house and that you are just paying a rent. View your property for what it is; a source of expenses. You make your monthly payment and pay for maintenance costs and taxes. Forget about the idea of paying off your mortgage, this is not happening as you are renting your property. Your rent is related to the interest paid on your mortgage. No capital, interest only payment. Remember, you are simply renting this property.
Your rent (minimum requested payment) will be minimal compared to a regular payment. Therefore, if you loose your job or if your income decreases for any other reasons, you should be able to keep up with you rent payment. You will also notice that interest only payment on your property will likely be the equivalent of renting a 5 Â½ condo in your area. Some will say you canâ€™t compare an apartment to a house as you donâ€™t benefit from a yard, basement and extra storage. I personally changed my perception to look at the worst case scenario. If I ever loose my job and I could not keep up with my mortgage payments, I might have to downsize from a house to a smaller apartment. In any cases, I rather keep my house and pay the same thing as I would pay for a smaller apartment! Keep in mind that taxes and maintenance cost must be added to your interest payment in order to keep the same scale of comparison.
Unfortunately, this cash flow is rarely used for the good reason; to create assets. The Smith Manoeuvre is part of the â€œpay yourself firstâ€ technique. By setting up automatic withdrawal from your HELOC and investing this money directly in your investment account, you will avoid wasting the extra cash flow on some other goodies.
In the end, by changing your perception of risk and of your mortgage, this is where you are going to end up: RICH! On a more serious note, you will pay your â€œrentâ€ while your investment is growing up. You will also build equity within your property as your house will gain in value over time. After 15-20 years yours house should have more than doubled in value and your investment should worth much more than your mortgage. Try to keep your parentsâ€™ voice away and shut down that â€œpay your mortgage first as it is your biggest debtâ€ mentality for a minute. You might find out another world of financial possibilities.
|How I Suck at Not Paying Debts||Hitting 6 Figures Income at 28|
|How I Get a Huge Income Raise Each Year||Making $125K Online in 12 months|
|How I Buy Blogs||Most Debated Articles: The Primerica Saga|
|How I Have Survived My MBA||What is So Wrong With Making Money?|
|How I run multiples blogs and makes money without burning out|