Bad Bank Customer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Are you good or a bad bank customer? If you are a good bank customer, you will have a poor financial future. If you are a bad bank customer, you will have a good financial future and the bank will be begging you to be their prized customer. Confused? Let me explain the riddle…

Interest rates are currently super low, and it appears that the rates may even go lower. A number of institutions are promoting 5-year fixed rates as low as 2.39%. On the other hand, for every $100,000 borrowed, the monthly payment is under $450.00. Word on the street is that money is cheap and probably getting cheaper as rates are on the decline. When rates are low and getting lower, people do not fear the magnitude of debt; however, debt needs to be feared.

Have you ever calculated the number of dollars the average mortgage costs over a 25-year term? The average 2018 mortgage in BC was $361,323. At a low 2.5%, the interest would add up to $124,258.51. However, at a rate of 5%, the number paid over the 25-year term balloons to $269,118.77! That is a substantial amount of money and we have not even started calculating in an individual’s car(s), toys, credit cards, and other interests that are paid over the course of one’s life.

See why debt needs to be feared? But do not completely freak out; paying interest on mortgage debt is not all bad. When there is mortgage debt, it allows a homeowner or real estate investor to leverage what equity they have so they can either afford to get into a home, or what I encourage all my clients do, buy investment properties to create passive income in the future.

All that being said, the end goal should be to pay off your personal home mortgage as quick as possible and live mortgage free—better known as “clear title”—and at this time, you become a bad customer of the bank. The reason why you become a bad customer of the bank is because the bank has lost you as an income source. You are no longer paying the bank interest on your mortgage; instead, they are now paying you interest on the money you have in savings.

Banks are in the business of lending out money. Banks are motivated to make you a good customer again and they not only want you to borrow more money, but they need you to borrow more money to keep their business model working. This is where being a bad bank customer reaps great rewards. As you now have no mortgage and are sitting on copious amounts of equity, the bank sees you as the perfect bad customer that they desperately want to make into the perfect good customer.

 

You have the opportunity to be in an incredible position as a customer of the bank. You were once a good customer of the bank when you were paying off your mortgage. After paying off your mortgage, you became a bad customer who is being sought out by the bank, hoping to entice you to become a good customer again. Fortunately for you, this is now on your own terms. Use this opportunity to leverage your relationship with the bank and the equity you have been acquiring to invest in more real estate.

 

originally published on eximus.com

Randy Dyck
Personal Real Estate Corporation
604-807-4366 or randy@eximus.com