Episode 9 - Selling a home with a 3% interest rate to buy a more expensive home with a higher interest rate!

If You List You Last Podcast

Here is the podcast link to get more detailed information on the upcoming FCC lead guidelines: https://www.housingwire.com/podcast/fccs-new-rule-on-selling-leads-will-have-significant-impact-on-real-estate-and-mortgage

In this episode, we tackle the pressing issue of the retirement savings wealth gap, specifically focusing on Generation X. According to Schroders' 2023 U.S. Retirement Survey, Gen Xers aged 43 to 58 believe they need a substantial $1,112,183 for a comfortable retirement. However, they expect to have just $661,013 saved, leaving a staggering gap of $451,170. This gap surpasses similar shortfalls faced by millennials and baby boomers.

Generation X is unique in that it's the first generation to approach retirement largely without the safety net of a defined benefit pension plan, making their financial situation more precarious. Meanwhile, older homeowners have seen significant wealth increases, primarily through home ownership.

We delve into the pivotal role of homeownership in wealth accumulation. Imagine having the choice between owning a $400,000 asset appreciating at 4% annually or a $700,000 asset with the same growth rate. It seems obvious, right? We explore the financial implications of this decision, running calculations for the next 20 years.

But there's more to the story. We also consider the total costs and benefits of acquiring that additional wealth. Interest rates and home prices have undoubtedly risen, but so has household income. Since 2020, average household income has increased by 12.2%. However, it hasn't kept pace with rising home costs and interest rates.

We make a couple of key assumptions: homeowners likely have significant equity and potentially some debts. We calculate how using equity to pay off debts can improve monthly cash flow, making a bigger mortgage more manageable.

In a conservative scenario, we assume a $400,000 home purchased in 2020, with 5% down, now worth $561,970. After accounting for sales commissions, there's $172,784 for paying down existing debt and a down payment. This can be a game-changer.

Taking the plunge into a larger home comes with a higher mortgage payment, but it's manageable with increased income. The surprise comes in the form of tax savings. A larger mortgage at a higher interest rate increases tax deductions significantly, saving you hundreds each month.

Putting it all together, you could add $657,287 to your equity while boosting your monthly cash flow by $596. Plus, if you pay off your mortgage in just seven years and invest the freed-up money wisely, you could accumulate an extra $801,021.

This episode may seem like a lot to digest, but understanding and explaining these financial strategies is why we created the Real Estate Asset Advisor designation. Join us as we dive deep into the intricacies of building wealth through homeownership. Remember, if you list, you last!

Tune in for an enlightening discussion on securing your financial future through strategic real estate decisions. Don't miss out on this opportunity to gain valuable insights and make informed choices for your financial well-being.

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