Practical Real Estate advice that can creat and protect your wealth.

I will write about the most frequently asked questions by many of my clients with regard to real estate financing, and let this serve as a general guide.

•1.    I have $300,000 cash should I put it all down to get a lower mortgage or better yes to have no mortgage at all?

Answer it depends. If you will buy a more expensive home just because you have $300,000 cash and without putting down more money you will not afford the payments then you should consider putting it down

However if you can afford the mortgage payments, and the only reason you are putting down more money is because you don't want to deal with the mortgage bills let me ask you these questions.

Would you burry money in a tight sealed pot somewhere on community property?

By paying for the house all cash you did just that! You paid for an asset that doesn't belong to you essentially the government can foreclose on your property if you owe them $2500 in water charges or environmental fees, in my book that's community property.

Would you deposit money in a bank account that does not always allow you to withdraw it? Well it's not to say that you will not be able to withdraw your money only to say that you have to qualify before you do. Would you? Or when coming to the bank to withdraw your money a very pleasant person will politely tell you we are very very sorry but the bank is tight in cash now and we cannot give you your money back at the present time. Would you invest in such a place?

That's exactly what you do if you pay off your house, most people go back to their property when they are in need of cash thinking they have enough money in it. But guess what the bank will deny you a loan if the market is though will you put $300,000 in such a position? Staying liquid is key Look at all the banks that survived this crazy market only the ones that remained liquid so you do the same!

But I hate bills what should I do?

By having this money invested you can have money paid to you monthly basis for as long as the money stays invested and that can even help you pay your mortgage.

        2. I am a Senior Citizen and I want to buy a house what type of mortgage should I get?

Answer. You should get a Reverse Mortgage, even if you have money to put down for the house don't use that money, have that money invested and out away for case of emergency. In addition, let it earn for you a rate of return.

A reverse mortgage is a mortgage that is in reverse. Normal mortgage you borrow lump sum and pay it off (exactly what amortization) A reverse mortgage is the bank gives you a lump sum or smaller monthly sums, and you balance slowly grows upward reverse from paying it off. The bank will give you a reverse on either a house you want to buy or on a house you already own to free up some cash. What A great way for freeing up cash for people on a fixed income i.e. retired folks.

3. Would you advise to take out an Interest only?

Answer. It depends why you want and interest only loan. If you want an interest only loan because otherwise the payment is too high I would say NO way! Rather don't refinance or purchase the house its way to expansive for you.

However if you want an interest only loan because you want more flexibility with your money for example to save the deference in payment, I would say yes please, and tell your friends too. As in matter of fact I advise my clients to get an interest only loan and keep paying the same like a full interest and principle loan. The interest you pay to the bank and the principle part to pay to themselves and deposit it into a side fund that yields at least a rate of 4% and let it sit as an emergency fund.

4. Is it a good time to buy now?

Again let me answer it with a question! Will it be a good time to start saving money now or should I wait a little? Are there seasons when it pays to save and when not to? Ludicrous! Always, start saving right now!

When you buy a house especially to live in it, you are essentially saving money! You are deducting the whole mortgage interest and it is like if you never earned that money when it comes to taxes. You can deduct up to 1,000,000 dollars on mortgage interest and yes you heard me right! So if you are paying taxes and paying rent you seriously need to rethink your financial structure. A person, who earns a $150,000 income and is a renter, will pay an average of 1500 dollars a month rent in the area I live in. That is 18,000 dollars a year spend on rent that is not deductable. That means if you are in a tax bracket of 34% that will be 6,400 dollars to the IRS. If the 1500 would be payment to mortgage interest, there will be no 6,400 to the IRS. Now are you ready to save money?

5. But shouldn't I wait until the market bottoms out!

Oh yeah? What is the bottom? How much should a single family cost for you to see that it is already rock bottom? There is no answer to this. Many times the in markets like this we notice the bottom when it already passed us.

And every house has a different bottom depending what the previous owner paid for it or borrowed against it. The owner doesn't care about the market, he wants to wrap around his debt in the selling price. Which marked bottom will persuade him? So the bottom you should be focused on, is your bottom line

Ask yourself the following question to determine if it is time to buy.

Can I afford this mortgage payment?

Can I save in taxes on this purchase?

Will this property go up in value in the next 5 to 10 years?

If the Answer is yes then grab it!