Have you ever gone into your bank and the banker didn't understand what your financial goal was? I'm working with Jim, a professional who wants to keep the current property he lives in as a rental and then buy another, more modern home to live in. His bank couldn't understand why he wanted to do that. Of course, Jim's a smart guy because he knows that the rental property will help him financially with his retirement.
When Jim came into see me (a referral from a local lawyer), he was frustrated and was almost ready to give up on his plans. About a half an hour later we determined that he had about $55,000.00 equity that he could extract from his current home valued at $270,000, and put about 10% down on the next house he wanted to buy. The great news for Jim is that he made a wise decision when he bought his originally house 6 years ago. The house was in a perfect spot for a rental - close to most amenities and centrally located.
Within another half hour we determined that the rental should have a longer amorization, to keep the cashflow high and also to limit the tax implications sometimes associated with the principal pay-down on a rental. A five-year fixed rate was a good choice here. For his new primary residence we set the amorization shorter to help him pay this mortgage off in 20 years on a weekly accelerated basis.
What took Jim almost 2 weeks to negotiate with his bank, took me about 1 hour to do. Let's just say Jim's story has a happy ending! :)
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