Leveraging Your Money to Get Rich Part II
Can you avoid risk by getting rich by borrowing money?
No. There is always risk involved. There is the possibility that your home will not increase in value, in which case you would end up owing more on the house than it is worth. So now what? Sell the house? Not likely. You’ll have to ask the approval of your master, the bank. Think about it. You started free and clear with $20,000.00, and now the bank owns you, and your $20,000.00. The debtor is the lender’s slave. However, if you don’t use the $20,000 for leverage, it won’t grow fast enough to outpace inflation and in 10 years will buy half as much as it can now.
Is it possible to buy a house without borrowing money?
Of course it is. You just have to have enough money. Banks are opportunistic. They know that most Americans don’t have $200,000 sitting around in the bank. The system has been designed to allow you to enslave yourself under the lender for a small fee, every month. Here’s how the transaction goes down, it’s quite simple. You show the bank you can pay the monthly mortgage payment, they write a check to the current owner of the home, then you pay them back over time. They take your down payment and invest it, and they collect massive amounts of interest from you every month on the outstanding balance of the loan.
In the previous scenario, you made a profit of $200,000 over 30 years. Imagine if you had paid for that house up front, free and clear. Your profit would have been $420,000.00.