What is burning your mortgage
A $600,000 mortgage at 4.0% over 25 years will set you back about $346,000 in interest costs. That $600,000 will end up costing you over $946,000. And that’s after-tax income, which means you’ll have to earn about $1,350,000 to pay off your home if you’re at the 30% tax bracket. No wonder it’s difficult to save for the future.
A $600,000 mortgage at 4.0% over 25 years will set you back about $346,000 in interest costs. That $600,000 will end up costing you over $946,000. And that’s after-tax income, which means you’ll have to earn about $1,350,000 to pay off your home if you’re at the 30% tax bracket. No wonder it’s difficult to save for the future.
What is the solution ? Pay off your mortgage faster.
And how do you do that? Implement a debt conversation strategy.
I am now obsesse with the Smith Manoeuvre Strategy. It is a smart financial strategy that helps homeowners make the most of their mortgage while reaping tax benefits. Here's how it works in simple terms:
Debt Conversion: Instead of simply paying off your mortgage, the Smith Manoeuvre™ suggests converting your mortgage interest into tax-deductible debt. This means you can deduct the interest you pay on your mortgage from your taxable income.
Snowball Effect: By converting mortgage interest into tax deductions, you start a snowball effect. As you deduct more interest, your taxable income decreases, resulting in larger tax refunds. These refunds can then be reinvested or used to pay down your mortgage faster.
Accelerated Mortgage Payoff: The strategy also helps homeowners knock years off their mortgage amortization. One strategy is utilizing the tax refunds to make additional payments towards the principal, you can significantly reduce the life of your mortgage.
Building Wealth: Simultaneously, the Smith Manoeuvre™ allows you to build a financial portfolio. The extra funds from tax refunds and accelerated mortgage payments can be invested in assets like stocks, bonds, or mutual funds, helping you grow your wealth over time.
In essence, the Smith Manoeuvre™ is a win-win strategy. It not only maximizes tax benefits but also accelerates mortgage payoff and facilitates wealth creation. However, it's essential to consult with financial experts to ensure it aligns with your specific financial goals and circumstances.
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