The Wealth Code 2.0: How the Rich Stay Rich in Good Times and Bad

Chapter 1

Freeing Your Estate from Conventional Thinking

Here’s an example of conventional thinking. Talking head after talking head preaches that you make extra payments and pay off your mortgage early. You’ll save tens of thousands of dollars in interest and will own your home outright sooner.

What are you doing by paying extra into the home? You are creating a situation that makes the mortgage holder salivate. Each time you pay extra, you place more money in their hands for them to invest for THEIR wellbeing, and you also lower THEIR risk. Let me repeat this. As you put more equity into the home, the mortgage gets smaller, and there is more equity protecting the lien holder in case you can’t make your mortgage payment for whatever reason. Death, disability, and divorce are common unforeseen reasons. If their risk is decreasing, what is happening to your risk? It is going up! You have the most to lose if you can’t pay your mortgage, and they take your home to auction and only cover what is owed to them, the mortgage balance. Auctions are not meant to protect the seller; they are meant to protect the lien holders.

I had a physician client who had not made a payment to the bank in 28 months on a $1.6M mortgage due to health issues that kept him from working. His monthly payment was around $9,000 and again, he stopped paying it twenty-eight months prior. The amazing thing was the lender, instead of sending him foreclosure notices, was sending him get well cards. The primary reason ...