Roger Schlesinger

Read it and reap!

It is so simple it is scary: two moves and you are there. The absolute easiest way for the youth of this country to become wealthy is to be wise enough to listen to someone who has answers and will give them the planning so they can succeed. Let me help you be that person.

There are two keys to wealth: using the current tax law and understanding the uniqueness of the 15 year loan. Once you study these two and realize that if things do not change you are on your way to a very nice experience and reward, I imagine your focus on this goal will be unwavering.

Let's start with the tax law. The current law allows those who are single or married to own a house, condominium, duplex, tri-plex or 4 plex, for at least 2 years and reap a tremendous tax benefit. You must own the property and live in it as your owner occupied for 2 years, or (if longer) two out of 5 years, in any order. If you do this then the first $250,000 in profit is tax free for an individual, or $500,000 tax free for a couple. Imagine you buying and selling a house every 5 years as an individual and having the luck, ability or both to create $250,000 in profit each time, you will have made a million dollars ($1,000,000) after owning and selling 4 houses.

Now let's look at the other key, the 15 year mortgage. 15 year seems to be the ideal loan to help you accomplish the above. Some will argue that even with a 30 year you can do this, although it might take a little longer. I am going to show you why I prefer the 15 year and use the example of a 15 year fixed versus a 30 year fixed.

Before I show you the example I am going to give you the reason it turns out the way it does -- This fact, more than any other example, gives you the understanding about any type of loan you are seeking and whether it will solve what you are hoping to accomplish. A loan payment is made up of principal and interest. Principal is the amount going to pay down the loan. Interest is the cost of using the banks money. From the first payment until the last one the amount going to principal increases and the amount going to interest decreases.

A 30 year loan at 4.375% has only 27% of the payment going to principal on the first payment and will take 14 years and 1 month for the principal to be equal to the interest. That means that during almost the first half of the loan the majority of every payment is interest. Compare that with a 15 year fixed at 3.5% which has 59% of the FIRST payment going to principal. That means every payment you make for 15 years has the majority of that payment being used to pay back the loan

Roger Schlesinger

Roger Schlesinger's Mortgage Minute is heard on hundreds of radio stations and daily on the Hugh Hewitt radio show and Michael Medved shows. Roger interacts with his hosts and explores the complicated financial markets in order to enlighten his listeners and direct them along their own unique road to financial freedom.


Get the best of Townhall Finance Daily delivered straight to your inbox

Follow Townhall Finance!