Florida's #1 Certified Mortgage Planner's Blog

Ok, as promised, here is what would have happened with your $10,000 investment when converted back to today's USD during the same time as my previous post's housing comparison. 

For a quick overview, this chart is based on you simply converting $10,000 USD to another currency and switching it back to USD today.  There are numerous ways to add additional rates of return (safely) in those other currencies and you would be even further ahead.  It is also not adjusted for inflation.

As you can see, a fairly good hedge against the devaluing of the USD, and your home is by investing overseas (or even next door).  Wouldn't you like to have investment rates like those all the time, except for the Japanese Yen, of course.

I did this particular post for two reasons.  The first is that you must include international investments as part of your investing.  That should be crystal clear.

The other reason is that, with an open mind, it is easy to achieve far greater rates of return than your mortgage costs, so stop "focusing" on paying off your mortgage and get onto investing.  Delaying will only cost you more money.

Don't have the money to invest?  Your mortgage may actually be able to help you by putting that idle equity to much better use.  Don't rush out and do it though.  There are a lot of variables that play into a mortgage and investment plan and you need to find the right team of experts to make it work.

That being said, if you are thinking about how to "employ your house", then feel free to contact me (link in upper middle column).  I will help the best I can and, of course, if you are in Florida, I can work you through the entire process.

(Disclaimer:  I know I said I would not be posting, but I did this one and will add the other simply because you will probably not see an analysis quite like this anywhere else...You should read both posts today) 

For those of us here in the states, we see our home prices falling and in many cases, particularly South Florida, plummeting into an abyss (Ok, it isn't quit that bad, but for some it seems like it).  With Existing Home Sales dropping at their fastest rate in decades (many relating it back to the Great Depression) and the continued fallout for the credit implosion, foreigners may find themselves at the right time to buy up Florida vacation or investment properties.

I am going to use my own house as an example for this one as I know exactly how much I paid for it in 2002 and how much it can fetch today, that is a realistic as it gets.  This will be a lesson in how currency exchange rates affect your purchasing power as well as how cheap some foreign nationals can grab up nice Florida homes (even at retail prices).

I paid $325,000 for my home back in 2002 and using today's estimated $600,000 (rounded up slightly) here is the comparison across the globe:

As you can clearly see, in other parts of the world, our home prices have not changed much, such as for Europeans using the euro as their currency.  My home in euros only appreciated 17.3%!!!

That chart also gives you an idea of how diminished our own buying power is elsewhere, even after the recent rally in the USD.

So, if you live in another country and are thinking about buying in Florida, this may be the opportunity of a lifetime.  The comparison above is "retail" and many homes can even be bought "marked down".

(I will, of course, post about how much US money you could have made if you had taken just $10,000 out of your property and invested it in a foreign currency.)

When you look at these numbers, it doesn't seem to really matter, does it?  After all it is only a difference of a couple of dollars.  Yet, look closer and you will see that in the first scenario you are losing $2 while in the second scenario you are gaining $2.  OK, still small potatoes, but now it is $4 (a fancy cup of coffee at Starbuck's). 

Think it is still no big deal? 

OK, let's multiply that by 1,000.  Still think it is small potatoes? 

Now, let's compound the problem over 30 years.  The difference clearly gets magnified over time.  And the problem is most Americans do not understand the time value of money.

The problem most Americans don't realize is the fact that focusing on paying off their mortgage can cost them hundreds of thousands of dollars over time.  While ever dollar sent to your bank saves on interest, you also lose tax benefits as well, thus your $6 saved really is only about $4. 

Now couple that with the fact that you could be investing that money instead, earning compound interest and gaining large amounts of money over time on the "spread".  So, the $4 it ultimately costs you earns $6 (or even more) and you gained $2 on that spread.  Again, multiply that by 1,000 and now you have an earning spread of $2,000. 

Notice I said spread of $2,000.  That is because you really have $6,000 earned on the investment side, but it did cost you $4,000 to get it.  It may not seem to be worth it right now, but let's look at another fact.

The interest earned on investments will get compounded, but the interest on a mortgage is flat.  So, every year your investment earnings will gain a larger spread while the annual cost will always be $4,000 if you have an interest only loan. 

Even with the fancy mortgage acceleration programs out there, you can achieve greater wealth over time by not focusing on paying off your mortgage. 

I know there is peace of mind in paying off all of your debts, so a mortgage acceleration program may be best for you.  But before you go into one, be sure you understand all of your options and read my Money Merge Account:  Beyond the Software series where I intend to show clearly how each option works and can be beneficial. 

Not visiting ActiveRain has been hard to do, but it was and still is necessary and I apologize for not providing the quality content you and the community deserve.  Simply put, I am swamped and most of it is pro bono work to educate the consumer on what they should or should not do.  I like giving back to the community, but it takes a lot of my time as well.

I am also trying to write the books I want to write (2 in process and 3+ more in waiting).  I am also working to systemize my process for resale and assisting other mortgage professionals to grow their own businesses using my unique process and marketing, licensed under my MEDS™ program.  Oh, and I am still flying, not to mention blogging on 3 other websites I run with another "mortgage advice" blog that will allow multiple mortgage professionals to contribute, more on that later.  I am even doing a weekly post on the mortgage market at Lenderama now.

As you can see, I have been busy and that is why I have to take long breaks from AR right now and for the foreseeable future.  I have too many AR friends and everytime I login, I feel the need to say hello to everyone and I just don't have the time to do that right now.  Please accept my apologies.  Please visit my other blog(s) if you want to see what I have been writing (one is in a widget to the right).  I am using Windows Live Writer to post them, which is easier than even the cut and pasting I need to do to post to AR, and that makes writing and posting go much faster (also easier to edit).

To all of my friends at AR (even those I don't know yet), I give a warm hello and an "I miss you".  Please accept my apologies for not being around, commenting, etc. and I look forward to my return and catching up.  Have a very Merry Christmas and Happy New Year if I am not back before then.