Real Estate Info & FAQ

Personal Finance and Strategic Equity

(cell 1) 3-6 Months emergency income
then
(cell 2) Get out of non-preferred debt
then
(cell 3) One year salary (liquid)
then
(cell 4) Payoff the mortgage


I must give proper credit to this model. It was developed by Jim McQuaig of Nations Home Funding of Reston, VA.

Basically, the model is a very conservative approach to personal finance, and I doubt that there would be anyone that would argue it would not work.

The real strategy comes into play in cells 3 and 4. It is Mr. McQuaig’s belief (and my own) that whether the mortgage is actually paid off or strategically paid off is the personal decision for everyone.

By actual payoff, I mean that the loan is satisfied and a payment is no longer made to the mortgage company. You own the home free and clear.

A strategic payoff is if cell 3 (One year salary in a liquid account) actually continued to grow to the point that there is enough in this account to payoff the mortgage at anytime. You personal balance sheet has an asset (the side account) greater than the liability (your mortgage). You are in a POSITIVE position.

There is much more to this model and this thought process. I will try to share more in the coming weeks. If you would like to discuss this further, or apply a particular situation to this model, call or email me.

Labels: Buyers, Financing, Mortgage Planning

posted by jkballentine @ 12:14 PM