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209 Fast Spare Time ays to Build Zero Cash - Tyler T.H.

Tyler T.H. 209 Fast Spare Time ays to Build Zero Cash - John Wiley & Sons, 2004. - 290 p.
ISBN 0-471-46499-6
Download (direct link): sparetimewaystobuildzero2004.pdf
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Count Your Way to Real Estate Wealth
209
2. Choose monthly P&I payments for your First Mortgage. Why? Because by doing so you pay down your debt, increasing your equity (ownership) in the property every month. Every dollar of equity you gain becomes a dollar (or possibly even $1.25) that you can borrow to buy another income property or improve your present building. REMEMBER: Pay P&I monthly. Doing so builds your real riches (your assets) in real estate!
3. Keep your First Mortgage for its full term—15, 20, 25 years. Why? Because partial, early repayment only takes cash out of your pocket without getting you much relief from your regular P&I payments. The only time you benefit from early repayment of your First Mortgage is when you can pay it off in full. Then you gain relief from your P&I payment, giving you an instant increase in your PCF. REMEMBER: Don’t make partial advance payments on your income-property First Mortgage. Instead, save your extra cash and wait until you can pay off your First Mortgage in full!
Second Mortgage Payment Strategies
Your Second Mortgage—usually your down payment loan—has different financial implications for you. So you’ll treat your Second Mortgage differently from your First Mortgage, namely:
• Pay off your Second Mortgage in full as soon as you can. Why? Because paying off your Second Mortgage in full early requires less cash than doing the same for your First Mortgage. Further, you get an instantaneous PCF increase for yourself—the most important person in this entire deal! Thus, if you’re paying $600 per month on your Second Mortgage and you pay it off in full, your PCF immediately rises by $600 per month. REMEMBER: Pay off your Second Mortgage in full as soon as you can to increase your PCF.
• Don’t fret or worry about the interest rate you pay on your Second Mortgage. Why? Because the interest you pay is provable and legitimately tax-deductible. Your main concern is to get your Second Mortgage loan because this loan opens the door to
210
Chapter 10
the world of real estate wealth for you. Without your Second Mortgage you could not get the property you own unless you dipped into your savings. With your Second Mortgage you’re on your way to real estate wealth! So look for and get the Second Mortgage you want and need. Never get discouraged when looking for your Second Mortgage. Keep applying at suitable lenders. REMEMBER: Your Second Mortgage is your key to wealth when you’re just starting your journey to your real estate fortune. Use every legitimate means you can to get your Second Mortgage loan!
Figuring Your Monthly Debt Service Cost
It’s easy—and fun—to figure your monthly debt payments using Tables
10.1 and 10.2 in this chapter. What I’ve done is this:
To simplify your calculations, I’ve listed your costs in terms of each $1,000 you owe on either your First or Second Mortgage. This speeds your figuring because it reduces to simple multiplication. You just use numbers from the tables below.
Table 10.1
Monthly Principal and Interest Payment Per $1,000 for Real Estate Loans
Interest Rate Term of Loan (Years)
15 20 25 30
5 7.91 6.60 5.85 5.37
6 8.44 7.16 6.44 6.00
7 8.99 7.75 7.07 6.65
8 9.56 8.36 7.72 7.34
9 10.14 9.00 8.39 8.05
10 10.75 9.65 9.09 8.78
11 11.37 10.32 9.80 9.52
12 12.00 11.01 10.53 10.29
14 13.32 12.44 12.04 11.85
Count Your Way to Real Estate Wealth
211
Table 10.2
Second Mortgage Monthly Principal and Interest Payment Per $1,000
Interest Rate Term of Loan (Years)
2 3 4 5
6 44.32 30.42 23.49 19.33
8 45.23 31.34 24.41 20.28
10 46.15 32.27 25.36 21.25
12 47.07 33.21 26.33 22.24
14 48.01 34.18 27.33 23.27
16 48.96 35.16 28.34 24.32
Now Do the Simple Numbers
Let’s say you’re buying an income property priced at $100,000 with a 25-year first mortgage for $90,000 at 8 percent, and a 5-year second mortgage for $10,000 at 12 percent. What will your total mortgage payments be?
Here are the five easy steps you take to figure your monthly payment:
1. Go into Table 10.1 and enter on the left at 8 percent and project across to 25 years and read $7.72 per $1,000 in mortgage loan.
2. Write these numbers: ($90,000 mortgage/$1,000)($7.72) = $694.80. This is your monthly debt service payment on your first mortgage.
3. Next, go into Table 10.2, entering at the left at 12 percent and project across to 5 years to read $22.24.
4. Write these numbers: ($10,000/$1,000)($22.24) = $222.40. This is your second mortgage monthly principal and interest payment.
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