Episode 31: The Truth About Your Mortgage

ABOUT THIS EPISODE

On this episode of the Build Your Life Podcast with Financial Expert John Browning, we're discussing mortgages.

If you have a mortgage on your home, be sure to tune in to today's episode. John shares his advice on when to pay off your mortgage, home equity loans and how the value of your home might be affected. Tune in for all the details!

For more information, visit www.GuardianRockWealth.com to learn more about what John can do for you. Or, give us a call at (312) 372-5000.

Welcome to the build your life podcast with John Browning. Build your life as a relaxed and unedited conversation with financial expert John Browning. John's the founder of Guardian Rock Wealth, with offices in Hawaii, Colorado and Illinois. John's also the author of the book build a life, not a portfolio, a guide to your financial future based on your personal values, which you can purchase on Amazon, or stay around to the end of today's show and I'll tell you how to get a free copy meld right to your door. I'm Michael Delan, your host for the next few minutes as we chat with financial expert, business owner and author John Browning and John Brownie. We are back again for another episode of Your podcast. How are you doing this fine day? I am doing fantastic. It's great weather, as always in Hawaii. And how about yours? How well it is? You know, ours is are normal now. Two weeks ago we lost it. We were down to about seventy...

...eight degrees with fifty percent humidity. Felt like probably Hawaii or San Diego. Then the humidity came back. So now we're at about ninety five with about eighty eight percent humidity, and so everybody complains and I'm like, it's Arkansas on the summer. What do you expect? It is what it is, right, it doesn't really change from here to hear. It's just gonna be that way. It is going to be that way. So yeah, it's awesome. I still take walks and just I love it. I doesn't matter to me at all. I carried the weather inside of me. How about that? There you go, that's right. Speaking of carrying thanks, John. My wife and I've been in this House for old ten or twelve years now and we are still carrying a mortgage and different financial people that I listen to and read and thanks. Some of them will say pay off your mortgage. Some of them would say no, no, no, your mortgage is really good. Give us some counsel there on. I guess the question is,...

...should I pay off my mortgage? And then I've got a couple other questions down the road, but I mean that's a big question. Most people have a mortgage. Should you pay off your mortgage? Should you not? What? How do you help people navigate that? Yeah, that's a great question and we get that quite a bit. It's it's a very common topic. People don't know you know should I, shouldn't I? And the answer is, as you'll hear from me often, Oh okay, depends, because it really does write so many things like it could. It could be right for one person to own a very high risk portfolio and another one to own a very low risk portfolio. It depends upon and your risk appetite and and, frankly, what your goal is. I often tell people we don't really manage to an index, we manage to a goal, your goals, because you're building your life and it's not so much about the portfolio like most people...

...think it is. And they also think of their portfolio as only being their stocks in their bonds, when really it's everything there they own, including real estate and including their mortgage. That's part of the overall financial plan and portfolio. But to answer your direct question, because I don't want to just say it depends and not give people an answer. Right, that's that's what everybody that is. But you know, again, it depends. But that's like that's like fire. Yeah, right, fire can be really good, right. It can warm you up, it can when it's cold, it can, it can cook your food, it can do all sorts of things. And when we learned how to use fire. It was fantastic before that it wasn't so fantastic. It can it can burn you. It can burn forests down right. Just a small spark can burn an entire forest down right. So it can also be a very bad thing. So what types of debt are good, Dad, and and some financial advisers will say no, debt...

...is good that. But if there were one type of debt that I would say might be, depending on your situation, good that it would be that mortgage, because at least real estate, in many cases, not all cases, but many cases, is an appreciating asset. So and with interest rates being as low as they are now, to get a mortgage it's probably the lowest, lowest rate of interest you'll be able to get on any other loan. That would be the one thing that you could leverage or use in order to increase your financial flexibility, which we talked about in an early, upper earlier episode, or increase your return of your overall portfolio. So there's a few different ways to go about that, but that's the general answer that I would give to that question for most people. Okay, well, and that's...

...that's good. You know, one of the things that that I'd love your opinion on. Say. So, when you pay off your mortgage over time, so if you've been in a house ten, fifteen year you have some equity build up there, and that equity really doesn't do you any good. In my opinion. It just sits there. Right, I can't really get to it and and we if my house goes down in value, I lose some of that. So there I read somewhere and in what we did is we got a home equity line of credit. So it's like a second mortgage. I want you to talk about that, because what it allowed us to do is have this. I kept my equity, but I was able to tap into that to remodel our house one time. Right, we needed fifteen, twenty thousand dollars. I could just go and tap that in and then we paid it off quickly. But it sits there. So talk about how that's just one way to use my equity that's in my house. Talked about some other strategies that you might be able to do. And is that even a good idea? I guess I should have that. Of course. Again,...

...it depends on the individual, all right, but what we've seen happen just very recently here with with another client, is that they would wanted to buy a house. It was a little difficult during the pandemic. The the bank was was being a little bit more difficult than normal to get that but they had enough cash in their personal portfolio that they could just buy the house outright. But was that the best use of the cash in their portfolio? So what they did in order to get the deal done they paid cash for the House and then refinanced it with a mortgage later when there wasn't such a you know, you're under the gun. You have to do it by dating all that, and we did recommend that for this particular client who had the risk parameters that it really made sense. They were able to get a very low interest straight loan on the for the mortgage once they finally got it done, and in their investment account over many, many years we've been able to...

...more than make up for and past performance is no guarantee of future results, of course, but we've been able to generate much more than what their mortgage was costing them in terms of return on their investments. And the second thing that does for you is give you financial flexibility like that Helock loan that you were talking about gives you financial flexibility. But one warning on that that I always mentioned the people back in two thousand and seven, two thousand and eight, those he locks were shut down by the banks. So that's something to be aware of. If you go through a very difficult time in your in the economy, they can shut those down and there's there's a little, you know, small print in there that says that they can just one day say, yeah, you had fiftyzero dollars available in your he like yesterday. Today you don't have that anymore. So you may want to be aware of that. You may want to draw it down, because they can't take it away...

...from you once, you know, all at once, once you take it out right speaking huh so what I recommend is that for financial flexibility, you gain control over that. It's okay, you're going to be paying a little bit of interest on that, but you put that money to work and you have that money working for you in a way. If you have the risk tolerance for this, you put it together in a you put it to work in a way that actually makes more than the interest that you're paying on the mortgage okay, well, that's a makes sense. Yeah, no, that does make sense. So then I have access the use of my money, right, and it's making more than why? I have to pay the bag because it is a loan, it's a it's a second mortgage really, and and so I have to pay that back on a monthly basis. So as long as my investments, whatever I'm doing, are making me more money and I can do that. It's interesting that that takes me back to our conversation last time about being real estate rich and cash poor. A lot of it has to do with cash flow. Not Everything, but a lot of it...

...has to do with cash phone what you're terming financial flexibility. Right, that's right. That's right, because at some point in at several points in my life, it's been all about the cash flow and not about how many assets that I have. Is One of the common misnomers that I found is that people have their house and they have their investment portfolio. Their investment portfolio they get a statement on every month or every quarter, so they see it kind of going up and down, up and down, and they get upset about that. What they don't get a statement on every month is how much their house is worth and how much that's going up and down. Because, guess what, that asset does go up and down depending on the you know what's going on in the real estate market in your particular location, right. Yeah, well, very much so. Which affection. How much equity I have in my home? I'm a one year have FIFTYZERO dollars. But if something happens in my town, a big industry leaves, housing value drops by ten or fifteen or twenty percent, that I have no control over. Guess what,...

...now only have fortyzero because the real estate market just took a dip. Right, and what you were saying earlier, if I had all that money out, I would still be able to use it, versus going to the bank and them saying you don't have that much. Right. And when we say use it, yes, you can use it for you know, something else that you want to purchase or home improvement, to increase the dollar your house or increase the enjoyment, because we're building a life here, not just a portfolio. Right, and I always like to say that because that is truly my theme. But it's also do you are able to have that money working for you because, to your point, if it's equity in your house, it's just sitting there and and in as a general rule, really state does appreciate over time, but generally speaking, given that you have to pay your your realisty, your mortgage, your insurance, your real estate taxes and...

...all the maintenance. And, by the way, when you go to sell or buy a house, there's commissions involved, legal costs involved in it takes time. You don't just go into the market and sell it one day and then you have the proceeds the next day. So you have all that wrapped up in your real estate. This financial flexibility of having that, having that in your bank account or in your investment account, having that working for you creates enormous flexibility for people. I think that's really, really important, John Is. It's something that people I'm sure I don't think about it too much, because you're right, I get my statements and everything, but I don't think about the flexibility. And that flexibility comes in play especially during a pandemic, because a lot of people have lost their jobs or they're not making as much. And if you, if you have all your money tied up into these investments or in my helock or wherever I need to be able to access it. I need to be able to have a lot more flexibility now because,...

...again, loo get out in the future. We're not sure what's going to happen, how long we're going to be here. Flexibilities are really big deal. I want to talk about that I in an upcoming next episode and really unpack this whole idea. I like how you phrase that financial lexibility, so we'll dive into that. But thanks for helping US understand a little bit about should I pay off my mortgage or not? Our he locks good or bad, and what are some ways we can we can use that to keep that money working for us. So that's great. I'm sure people have questions about that and a lot of other things. So let me encourage your listeners just to reach out and connect with John Guardian rockwealthcom. You can there on the home page or in the the contact us about US page. Reach out to him. I have a conversation through email, throughsum, through phone call, that old thing called a phone. It still works. It's still work. Crazy. I had I had a call with a client the other day and we had to use the phone and I'm like wow, this is crazy, but it still works to reach out and talk to John See how he can help you build a life, not just a portfolio, and I love...

...that, John. That's that's great. That's by the way, the title of his book is Amazon Best Selling Book. Build a life, not a portfolio. So, John, thanks again for taking some time helping US understand a little bit more about how we can structure things so that we actually can build a life and enjoy life as we're building that portfolio. That's been great to be here. Thanks a lot. All right, bye, bye. Okay, so thanks for listening to the building your life podcast with John Brownie. Be Sure to subscribe to this podcast so each new episode will be sent to you automatically when it is released. Have a terrific day.

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