Equity Repositioning: Why It Works
Pay “Simple Interest” on a mortgage and earn “Compound Interest” on your side account…
The foundation of equity repositioning has to do with the “Simple Interest” you pay on your home mortgage vs. the “Compound Interest” you earn in your side account. Here’s an example:
$100,000 borrowed at 7% = $7000 annual interest x 15 years = $105,000 in simple interest paid.
$100,000 earning 7% in a side account for 15 years = $175,000 in compound interest earned.
That’s a $70,000 profit you made using the lender’s money.
Plus you still have the $100,000 you started with. When you add the $175,000 interest you earned to your starting $100,000 you now have $275,000 cash in the bank.
The calculator below will teach you more about this powerful concept. Play around with the numbers and see how moving a portion of your home equity or redirecting principal payments can help you create financial independence. The calculator will open in a separate window as an excel spreadsheet.
