A Borrowing Tip ...

Have you ever wondered if it was possible to lower you monthly payments? Would you like to pay off your home early? Listen up!

You can borrow money from the bank at one interest rate and then invest the cash at a higher rate of interest. But there is a twist that will also let you increase your net worth, just jump in and discover what can be right under your nose.

Say you have some equity in your home or other assets, you can borrow money against those assets, lets say at 12%. This will allow you to invest that money in a higher yielding mortgage, let's say at 18%. The difference will give you a positive cash flow that can be applied toward your home loan. This extra income will allow you to pay off your home loan much earlier than scheduled.

Here's the twist, once you purchase notes yielding 18%, the notes can be used as collateral to borrow more money!

Example: Your house is worth $200,000.00 and the first mortgage is $100,000.00. The interest rate is 10% with a monthly payment of $877.57 over 30 years. You already have $100,000.00 worth of equity in the house. You go to your bank or any bank in America and borrow $50,000.00 on the equity in your house at an interest rate of 13% that is amortized (to decrease an amount gradually or in installments, especially in order to write off an expenditure or liquidate a debt) over a 15 year period, your payments on the loan are $632.62.

You now have $50,000.00 in your pocket and with some skill and knowledge you can invest that money in some safe real estate mortgages, with an 18% yield. The face value of the note is $74,438.00 and you'll receive $799.91 monthly. Your already paying the bank $632.62 so your positive net cash flow is $172.59 monthly.

Now go to another bank and borrow more money on the $74,438.00 worth of notes you now hold. This is referred to as "hypothecation"( the use of property, or an existing mortgage, as security for a loan, etc). The notes belong to you and they are not encumbered with any other loans. With this "hypothecation" loan you'll net $57,012.58 in cash at 15% interest, your payments will be $797.94. With that money you'll buy, say a note at 18% yield, with a face value of $85,439.76 and receive payments of $918.14.

Let's break this down:

Your Debt:		$50,000			home mortgage			13%			$632.62
		$57,390			hypothecation			15%			$797.94
Your Income:		$74,438			note #1			10%			$799.91
		$85,44 0			note #2			10%			$918.14
Your Cash Flow		$287.49
Your Increased Net Worth		$52,448

You apply your cash flow of $287.49 to your home mortgage and instead of paying the original mortgage of $877.57 with your added cash flow you pay them $1,165.06 a month. Your 30 year mortgage with then be paid of in 12.61 years and you will save $139,929.00 in interest payments!

I am not in any way a financial annalist nor am I qualified to give any financial advice. This is just a hypothetical situation with a positive outcome but if you have that kind of borrowing power, why wouldn't you be able to do something similar? Just some food for thought ...