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Why Financial
Equalization Works. |
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In order to understand the
Financial Equalization concept, we must first understand exactly what
a mortgage is and how it works. What the financial principles
involved are, and how they are applied. In short, identify the
problem, define the results you want to achieve, and finally, find
the weak links in the mortgage amortization chain. |
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1. A mortgage is an installment
loan, just the same as a car loan or a personal loan.
2. Installment loans are front
end loaded, the majority of the interest cost is collectible by the
lender up-front.
3. The loan payment is based on
the initial amount of the loan, and the interest charges on this
amount are attached according to the term of the loan.
4. The longer the time period
(term) involved, the greater the increase in the amount of interest payable.
5. On a mortgage loan, since the
time period is long term and the interest is payable up front, the
result is that in excess of 90% of each mortgage payment in the early
years are interest costs and over the amortization period these
interest charges gradually decrease until the loan is repaid.
6. Since the interest costs are
added to the initial amount borrowed, this also means that no matter
how small your outstanding balance becomes over the years, you are
paying interest on the original amount borrowed. |
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Example: You borrow
on $100,000 for 25
years @ 9% your monthly payment is $828. After 15 years of payments
you will have paid out $149,040 principal and interest, and you will
still owe $65,822. Your payment on this balance will be $828 per
month, the same as if you still owed the $100,000.
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7. Time is your enemy on a
mortgage loan, much more so than interest rates. For the lender, MORE
TIME = MORE PROFIT.
8. Three things must happen in
order for you, the borrower, to gain a financial advantage in this situation: |
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1. Time must become the
borrower's ally, not the lender’s.
2. A way must be found to
increase the efficiency of the
principal reduction portion of
each payment.
3. The weak link in the mortgage
amortization chain
must be used to the
borrower’s advantage. |
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FINANCIAL EQUALIZATION
makes these three things happen.
It is safe, easy and it works!
It allows you to save thousands
of dollars in interest charges, save years of payments, and most
importantly, accomplish these savings without any increase in debt
payment obligations.
FINANCIAL EQUALIZATION is
not too good to be true.
It is simply a concept that
utilizes the whole truth.
Financial institutions are in
business to make a profit,
as much as possible.
They are not obligated to tell
you how to decrease
the profitability of their business.
If you were in business as a
lender, would you!
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