Comments on: Review of Automatic Millionaire Homeowner by David Bach

By: Owen Avery

Owen Avery — Wed, 11 Jul 2007 18:35:52 +0000

Dus10
Here are two really good sources http://www.taxdeferredstrategist.com and http://www.myrealestateira.com the sites are very informative

By: fivecentnickel.com

fivecentnickel.com — Sat, 18 Feb 2006 04:27:07 +0000

Weekly Roundup – 02/17/06

Here’s a quick look at some of the week’s top articles from the MoneyBlogNetwork and beyond…

FMF from FreeMoneyFinance has an article on the biggest money mistakes that new parents make.
JLP from AllThingsFinancial wrote …

By: Consumerism Commentary

Consumerism Commentary — Fri, 17 Feb 2006 18:33:16 +0000

Everybody Look What’s Going ‘Round

Here sre some interesting posts from the MoneyBlogNetwork and more this past week. AllThingsFinancial has a review of David Bach’s Automatic Millionaire Homeowner, which I also reviewed here. Free Money Finance has some suggestions about how to k…

By: Jesse

Jesse — Fri, 17 Feb 2006 15:18:18 +0000

I think if you’re already investing 15% into retirement, paying down even a low-rate mortgage can be very advisable, tax breaks and all. I think that people who own their houses outright have more financial flexibility and can then afford to taking higher risks with their careers: starting a business, striking out on their own, etc. Until my house is paid off, I don’t feel as comfortable walking away from “steady employment” to start my own thing.

Just a qualitative (though it could be seen as quantitative, depending on what options you’re weighing) look at payind down your mortgage. Remember, though, this is once you’re socking away at least 15% gross into retirement.

By: Dus10

Dus10 — Thu, 16 Feb 2006 14:56:08 +0000

I would agree to an extent. If you have a really low rate (like below 6%), do not go too crazy with trying to pay it off early. I would say that you should try to get a decent amount of equity built up, however, because it gives you a lot of leverage in the event that you need to get some credit. Also, I really do not like the idea of how people determine the extra amount to pay on their mortgages. For example, Bach says you should pad your principal with an extra 10% of your entire mortgage, including escrow, which will come out to around on full payment extra a year. However, if you break your mortgage down with an amortization table, you can see a better way. Bankrate.com has a tool to build an amortization table. Essentially, since you are concerned with principal, all you need to do is look at the principal portion of each mortgage payment. If you want to make an extra payment, pay this months entire mortgage, then send in an extra check that covers next months principal. Then, check off this months payment and next months payment. Then, when next month rolls around, you make another full payment, and continue on with extra payments in that manner. This method allows you to really break down your mortgage to its very basics… 360 payments, and you immediately see how much you are saving in interest with each and every extra principal payment that you make. You will also notice that you will benefit more from doing this in your first seven years than you will by doing it after those years. Further, consider that interest is in today’s dollars… and the savings will be savings you receive in the future, with future dollars… meaning you are not saving as much as you think you are. There is a lot to weigh when considering accelerating your mortgage. If you have a very low rate, then get enough equity and buy an investment property that can generate a little extra cash flow. That extra cash flow can offset your mortgage payment, and build equity in an investment. This will give you the same piece of mind as having your mortgage paid off, but with a better return.

By: JLP

JLP — Thu, 16 Feb 2006 03:43:29 +0000

RS,

I WOULD NOT pay off a low rate mortgage any faster than you have to. Although it isn’t guaranteed, over the long-run taking the $200 per month an investing it in the stock market will give you a better return than paying off your mortgage early.

Many people will disagree with me. You have to do what you are comfortable with.

By: RS

RS — Thu, 16 Feb 2006 03:16:49 +0000

My first question was going to be…is this book worth getting if I already read The Automatic Millionaire, but since you didn’t read that one, can anyone else answer?

I would also have to agree with both you and Dus10…41% seems like it is a really high ratio. My ratio is probably around 24% and I would love to see it be lower.

I also wonder about the advice to pay off the mortgage early. As an example, my mortgage is at 4.875%. I was paying an extra $200 a month towards my principle to equal about an extra payment each year. One of the pieces of advice that I have heard is to take that money and invest it. In theory, over 30 years I should be able to make more than 4.875% investing that so I should be able to come out ahead. Agree? Disagree?

Thanks.
-RS

By: Flexo

Flexo — Thu, 16 Feb 2006 03:16:06 +0000

JLP – I have a favorable opinion (and review) of the book, as well. Good resource.

By: jim

jim — Thu, 16 Feb 2006 01:56:36 +0000

Man I feel left out… no review copy for me.

By: Dus10

Dus10 — Thu, 16 Feb 2006 01:47:00 +0000

By the way, JLP, I see you have links to Amazon for Millionaire Maker. I read that last week, and I have had no luck with LiveOutLoud.com, or reaching anyone there via email. I registered on the forums, and I cannot log in. Have you tried any of it? I am trying to find some good info from her on truly self-directed IRAs.