In our last article Jack and Jill each had $100,000 of cash – and bought identical homes next door to one another. Jack paid cash for his, while Jill invested her cash and took out a mortgage to buy her home.
Both homes appreciated to $110,000 one year later, so both “earned” the same amount – $10,000. But Jill had no equity, proving that there is no return on equity – only a return on the value of the asset (her home).
But here’s the rest of the story.
Turns out, Jill had invested her money through a financial institution that let her borrow the $100,000 she needed for the house, at a low 4% rate of interest. She decided to repay the loan at 6% – which was totally her choice. Voila – the 2% difference goes right back into her account!
How? Is that really possible?
It is possible – and thousands of people are building wealth in accounts with financial institutions that will allow this kind of flexibility.
What’s more, Jill doesn’t have to “qualify” for the loan. She just calls up the financial institution – and tells them how much she needs – and where to send the check.
Because Jill is in control, she can skip a payment (or several if she needs to), or accelerate repayment if she wishes. The interest rate at which she repays the loan is up to her. In other words, because she’s become her own banker – she makes all the decisions the bank would normally make.
Wouldn’t that be nice? Want to learn more? Comment back and let me show you.