Diversify Diversify Diversify… that’s the mantra of today’s Financial Planner.  Many people disagree with that quote – big notable investors like Trump, Buffett etc…

But that’s what we’re taught… diversification reduces risk and increases return over the long term.

But … when we’re talking about our Primary Residences and diversification, are traditional Financial Advisors barking up the wrong tree??

Most traditional Financial Advisors are eager to get you on the path to owning your house outright.  They have all sorts of ways to teach you how to scrimp and save so that when you are in your 50’s and 60’s you have paid off your house.

But… what exactly is the advantage of paying off your house?

If their mantra is "Diversify Diversify Diversify" yet in another breath they say, "No Mortgage, No Mortgage, No Mortgage" then aren’t they contradicting themselves??

Let me tell you why they are!

Because they are essentially telling you that you need to take a large portion of your potential retirement funds… your nest egg… and sink those funds into an illiquid asset.

These are funds that should be there for you in retirement…but instead this large sum of money (see your Truth In Lending of your Mortgage Application to see how much money we’re actually talking about) is funneled into your house where you cannot use it.

Sure – you can get a HELOC (aka Equity Line)… or one of those backwards thingies that will be outlawed in coming years… but why not have the money outside of the house in the first place where you can access it AND earn interest on it?

Yes… earn interest. 

You’re spending interest when you have a mortgage so why not earn interest with the money you would have used to pay down the mortgage?? 

Isn’t that a Win-Win?

Think of it…sometime in the future when you need money for something big – like an emergency or to finally replace that old car that just passed away right before you could pass it on to your grandson… and you have worked a long time to make that money.  Then you have to call someone like me and I have to tell you how much it will COST YOU to access your money!

Holy Smokes!! You never thought of it that way??

Well… that’s the way traditionalists don’t want you to think… that’s the way people that subscribe to Depression-era Economics don’t want you to think.  

After the Depression, the banks had to figure a way to make mortgages safer for THEIR money, not yours… they figured how to get you to pay them all their money back plus gobs of interest.  But how does that benefit YOU?

I say it doesn’t.  Separation of your Assets is important.  It is Diversification at its finest.  Separate your Equity aka Cash from your house and invest it elsewhere.  Letting it pile up in house isn’t making the house worth more!  But the cash itself will be worth more as it accrues interest outside of the house.

Think of it… the house appreciates with the market and your money appreciates in an outside investment.  Diversification has just made you extra money!

That money is just what you’ll need when you decide it is time to leave the kids in the Snowy Midwest and become a full time resident of Sunny Florida!

More Florida Mortgage and Real Estate News You Can Use From
David A. Podgursky, MBA
TheMortgageGoToGuy.com
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