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Readvancable Mortgage - An Idiot’s Guide

Normally I like to steer clear from posts of the serious nature; browse the rest of the site if you don’t know what I’m referring to. But all bets are off when I can help the little guy, (you and I), stick it to the man, (big banks in this case).

I recently heard about a ‘readvancable mortgage’ on the radio, (it’s amazing the types of commercials you’ll hear while listening to shock radio). I brought the concept to my accountant, he consulted with his team, told me it was possible, and sent me a HUGE bill. If you want to save a few bones on your home mortgage…keep reading below.

Let’s say you have a $200,000 mortgage at 7% interest over 25 years. If this is a readvancable mortgage, you pay down the principal with your monthly payments and you would immediately be readvanced that amount to be invested in stocks, bonds or other real estate.

Since the amount readvanced back to you is for investment purposes, the interest on it is tax deductible. Basically a free loan.

You are splitting the mortgage into two parts: as the principal on one side is lowered, the the principal on the other side goes up, keeping the total principal outstanding at $200,000.

The tax savings initially won’t be considerably high however as time goes by, so does your interest on money for investing purposes.

Do all banks provide a readvanceable mortgage? No..but there should be one in your area! If you find one…leave a comment for me below and let me know so I can post it here!

So go ahead and buy another house or two! Make sure you invite me to your house warming party!

The system is known as the Smith Maneuver and was developed by Fraser Smith. See his website for more information, smithman dot net. Check with a professional financial planner before following any advice provided above.

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