AMERISTAR FINANCIAL NETWORK Presents A Tale Of Three Brothers

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AMERISTAR FINANCIAL NETWORK

Presents

A Tale Of Three A Tale Of Three BrothersBrothers

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A Tale of Three A Tale of Three BrothersBrothers

This is a story of three brothers, This is a story of three brothers, each earning $75,000.00 per each earning $75,000.00 per year. Each brother has year. Each brother has $60,000.00 in savings and is $60,000.00 in savings and is buying a $300,000.00 house.buying a $300,000.00 house.

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Brother “A” Brother “A” believes in paying believes in paying off the mortgage as soon as he canoff the mortgage as soon as he can

15-Year Mortgage at 5.00 %15-Year Mortgage at 5.00 % $ 60,000 as a down payment$ 60,000 as a down payment $0 savings left over to invest$0 savings left over to invest $ 1898 monthly payment $ 1898 monthly payment (52% tax(52% tax deduction in first deduction in first

year)year)

$ 1624 average monthly after-tax payment$ 1624 average monthly after-tax payment22

Wants to eliminate his mortgage as he is afraid Wants to eliminate his mortgage as he is afraid of losing his houseof losing his house

2 Assumes a combined federal/state income tax rate of 28%2 Assumes a combined federal/state income tax rate of 28%

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Brother “B” Brother “B” ccarries a longer arries a longer

mortgage thanmortgage than brother “A” but also adds $ 100 per brother “A” but also adds $ 100 per month to his paymentmonth to his payment

30-year mortgage at 6.0%30-year mortgage at 6.0% $ 60,000.00 as down payment$ 60,000.00 as down payment $0 remaining to invest$0 remaining to invest $ 1439 monthly payment $ 1439 monthly payment (53% tax deductible in first (53% tax deductible in first

year)year) $ 1105 average monthly after-tax payment$ 1105 average monthly after-tax payment 22

Sends in extra $ 100 per month to eliminate Sends in extra $ 100 per month to eliminate mortgage payment earlier. Invests the other mortgage payment earlier. Invests the other $359 per month. $359 per month. 44 Account earns 10% Account earns 10% rate of return rate of return

2 Assumes a combined Federal/State Income Tax rate of 28%2 Assumes a combined Federal/State Income Tax rate of 28%4 The monthly cash flow is determined by comparing the minimum payments against brother “A” minus the $ 100 he sends 4 The monthly cash flow is determined by comparing the minimum payments against brother “A” minus the $ 100 he sends

in as an in as an additional payment on his mortgage additional payment on his mortgage

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Brother “C” Brother “C” believes that using his believes that using his

house as ahouse as a financial tool is a key to obtaining financial tool is a key to obtaining wealth. Brother “C” seeks out the loan with the wealth. Brother “C” seeks out the loan with the lowest paymentlowest payment..

Low Payment Loan at 1.95%Low Payment Loan at 1.95% 11

$30,000.00 as down payment$30,000.00 as down payment $30,000.00 remaining to invest $30,000.00 remaining to invest 33

$991 monthly payment $991 monthly payment (100% tax deductible in first (100% tax deductible in first year)year)

$277 average monthly after-tax-payment for the $277 average monthly after-tax-payment for the first year first year 22

Adds $100 to his monthly investments, plus an Adds $100 to his monthly investments, plus an average of $874 per month over for 5 years.average of $874 per month over for 5 years.

Account earns a 10% rate of returnAccount earns a 10% rate of return1 This example is based on a payment driven loan. The minimum payment is based on a rate of 1.95%, whereas the note 1 This example is based on a payment driven loan. The minimum payment is based on a rate of 1.95%, whereas the note

rate of mortgage rate of mortgage is assumed to be 6%. For the illustration above, the index is considered to be constant throughout the term of the loan; is assumed to be 6%. For the illustration above, the index is considered to be constant throughout the term of the loan;

actual results actual results may vary.may vary.2 Assumes a combined federal/state income tax rate of 28%2 Assumes a combined federal/state income tax rate of 28%3 Assumes a 10% rate of return on investment, investment results may vary depending on type of investment3 Assumes a 10% rate of return on investment, investment results may vary depending on type of investment

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Who made the right Who made the right

decision?decision? Results after just 5 years:Results after just 5 years:

Brother “A”Brother “A” Brother “B”Brother “B” Brother “C”Brother “C”

Received $ 14,787 Received $ 14,787 in tax savingsin tax savings



Has $ 0 in savings Has $ 0 in savings and investmentsand investments

Has $ 28,000 in Has $ 28,000 in savings and savings and investments investments 33

Has over $ Has over $ 115,000 in savings 115,000 in savings and investmentsand investments

3 Assumes a 10% rate of return. Rate of return may vary based on type of investment

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What if all three What if all three brothers suddenly lose brothers suddenly lose their jobs?their jobs?Brother “A”Brother “A” Brother “B”Brother “B” Brother “C”Brother “C”

Has no savings to Has no savings to get through the get through the crisiscrisis

Has $28,800 in Has $28,800 in savings to support savings to support him him 33

Has $115,000 in Has $115,000 in savings to tide him savings to tide him overover33

Can’t get a loan – Can’t get a loan – even though he even though he has $121,000.00 has $121,000.00 in equity – because in equity – because of no jobof no job

Can make his Can make his mortgage payment mortgage payment for 1.5 years.for 1.5 years.

Doesn’t need a Doesn’t need a loan – he can make loan – he can make his mortgage his mortgage payment for more payment for more than 8 yearsthan 8 years

Must sell his home Must sell his home or face foreclosure or face foreclosure as he can’t make as he can’t make his paymentshis payments

Doesn’t panic right Doesn’t panic right awayaway

Has no reason to Has no reason to panic, has plenty panic, has plenty of cash on handof cash on hand

3 Assumes a 10% rate of return of invested funds, rate of return may vary base on type of investment

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Results after 30 Years:Results after 30 Years:

Brother “A”Brother “A” Brother “B”Brother “B” Brother “C”Brother “C”

Owns his home Owns his home outrightoutright

Owns his home Owns his home outrightoutright

Has 25 more years Has 25 more years remaining remaining 66

Has $787,000 in Has $787,000 in savings and savings and investments investments 7,37,3

Has $812,000 in Has $812,000 in savings & savings & investments investments 33

Has $ 2,510,00 in Has $ 2,510,00 in savings and savings and investments.. investments.. Retires at willRetires at will

Can’t even begin Can’t even begin to think about to think about retirement; His retirement; His nest egg is $1 mil nest egg is $1 mil shortshort

Did o.k., but still is Did o.k., but still is more than $1 more than $1 million short of his million short of his goalgoal

Sends a check to Sends a check to the bank to pay off the bank to pay off his house… if he his house… if he wantswants

3 Assumes a 10% rate of return, rate of return may vary based on type of investment used

6 Brother “C” refinances every 5 years, dropping his minimum payment back down to low 1.95% payment level and starting all over

7 Brother “A” paid house off in 15 years and started investing the savings

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Cash is King!...and Brother “C” now Cash is King!...and Brother “C” now has more than has more than $ 2.5 million in $ 2.5 million in savings and investmentssavings and investments! Your ! Your best investment is best investment is notnot in your house in your house – people who understand how money – people who understand how money works choose a big mortgage, use it works choose a big mortgage, use it to create wealth, and to create wealth, and nevernever pay it pay it off!!!!!off!!!!!

Remember………………Remember……………………

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AMERISTAR FINANCIAL NETWORK Presents A Tale Of Three Brothers