The Snowball Effect: How Compound Interest Can Skyrocket Your Wealth-Building Journey

Diane Gogar • Apr 24, 2023

Are you interested in building long-term wealth?

If so, you'll be amazed at this incredible financial tool that can help you achieve your financial goals.

When used in combination with a smart investment strategy such as the Smith Maneuver, you can leverage this powerful tool to create a passive income stream and achieve financial freedom.

Here are some key points to consider:

The Power of Compound Interest

Compound interest refers to the interest earned on both the initial investment and the interest that accumulates over time. This means that the longer you invest, the more interest you earn, and the more your investment grows. Essentially, your money snowballs and becomes a powerful wealth-building tool.

Here's How


Suppose you invest $10,000 today in a well-diversified portfolio that earns an average annual return of 8%. 

In 30 years, that $10,000 investment would be worth approximately $100,000, thanks to the power of compound interest.

Now, let's combine this with the Smith Maneuver strategy. 


The Smith Maneuver Strategy

Using the Smith Maneuver, you can create a tax-deductible investment loan using your mortgage, allowing you to invest in income-producing properties. 

By doing so, you can accelerate the power of compound interest and create a passive income stream that can provide you with financial security for the long term.


Building Long-Term Wealth

Compounding interest and the Smith Maneuver can help you build long-term wealth and achieve financial freedom.

As a mortgage agent and certified Smith Maneuver specialist, I can help you create a customized plan that suits your unique financial goals and helps you build wealth for the long term.

Let's Implement

Here's an actionable strategy to help you implement the Smith Maneuver:

  1. Speak with a certified Smith Maneuver specialist to determine if this strategy suits you.

    (That's me! Click here to schedule a FREE Smith Maneuver Strategy Call)

  2. If the strategy is suitable, ensure you have enough equity in your home to implement the Smith Maneuver.

  3. Obtain a secured line of credit that you can use to invest in income-producing properties.

  4. Use the secured line of credit to invest in properties that generate income.

  5. Use the rental income your properties generate to pay off your mortgage and secured line of credit.

  6. Repeat the process until you have created a passive income stream that provides financial security for you and your family.


If you're ready to start building wealth through compound interest and the Smith Maneuver, let's discuss how we can work together to achieve your financial success.

Book a call with me to strategize and create a customized plan that suits your unique financial goals and helps you build wealth for the long term.


DIANE GOGAR
MORTGAGE PROFESSIONAL
CONTACT ME

Understanding Payment Frequency

By Diane Gogar • 08 May, 2024
You’ve most likely heard that there are two certainties in life; death and taxes. Well, as it relates to your mortgage, the single certainty is that you will pay back what you borrow, plus interest. With that said, the frequency of how often you make payments to the lender is somewhat up to you! The following looks at the different types of payment frequencies and how they impact your mortgage. Here are the six payment frequency types Monthly payments – 12 payments per year Semi-Monthly payments – 24 payments per year Bi-weekly payments – 26 payments per year Weekly payments – 52 payments per year Accelerated bi-weekly payments – 26 payments per year Accelerated weekly payments – 52 payments per year Options one through four are straightforward and designed to match your payment frequency with your employer. So if you get paid monthly, it makes sense to arrange your mortgage payments to come out a few days after payday. If you get paid every second Friday, it might make sense to have your mortgage payments match your payday. However, options five and six have that word accelerated before the payment frequency. Accelerated bi-weekly and accelerated weekly payments accelerate how fast you pay down your mortgage. Choosing the accelerated option allows you to lower your overall cost of borrowing on autopilot. Here’s how it works. With the accelerated bi-weekly payment frequency, you make 26 payments in the year. Instead of dividing the total annual payment by 26 payments, you divide the total yearly payment by 24 payments as if you set the payments as semi-monthly. Then you make 26 payments on the bi-weekly frequency at the higher amount. So let’s use a $1000 payment as the example: Monthly payments formula: $1000/1 with 12 payments per year. A payment of $1000 is made once per month for a total of $12,000 paid per year. Semi-monthly formula: $1000/2 with 24 payments per year. A payment of $500 is paid twice per month for a total of $12,000 paid per year. Bi-weekly formula: $1000 x 12 / 26 with 26 payments per year. A payment of $461.54 is made every second week for a total of $12,000 paid per year. Accelerated bi-weekly formula: $1000/2 with 26 payments per year. A payment of $500 is made every second week for a total of $13,000 paid per year. You see, by making the accelerated bi-weekly payments, it’s like you end up making two extra payments each year. By making a higher payment amount, you reduce your mortgage principal, which saves interest on the entire life of your mortgage. The payments for accelerated weekly payments work the same way. It’s just that you’d be making 52 payments a year instead of 26. By choosing an accelerated option for your payment frequency, you lower the overall cost of borrowing by making small extra payments as part of your regular payment schedule. Now, exactly how much you’ll save over the life of your mortgage is hard to nail down. Calculations are hard to do because of the many variables; mortgages come with different amortization periods and terms with varying interest rates along the way. However, an accelerated bi-weekly payment schedule could reduce your amortization by up to three years if maintained throughout the life of your mortgage. If you’d like to look at some of the numbers as they relate to you and your mortgage, please don’t hesitate to connect anytime; it would be a pleasure to work with you.

Protect Yourself at Renewal

By Diane Gogar • 01 May, 2024
It’s a commonly held belief that if you’ve made your mortgage payments on time throughout the entirety of your mortgage term, that the lender is somehow obligated to renew your mortgage. The truth is, a lender is never under any obligation to renew your mortgage. When you sign a mortgage contract, the lender draws it up for a defined time, so when that term comes to an end, the lender has every right to call the loan. Now, granted, most lenders are happy to renew your mortgage, but several factors could come into play to prevent this from happening, including the following: You’ve missed mortgage payments over the term. The lender becomes aware that you’ve recently claimed bankruptcy. The lender becomes aware that you’re going through a separation or divorce. The lender becomes aware that you lost your job. Someone on the initial mortgage contract has passed away. The lender no longer likes the economic climate and/or geographic location of your property. The lender is no longer licensed to lend money in Canada. Again, while most lenders are happy to renew your mortgage at the end of the term, you need to understand that they are not under any obligation to do so. So how do you protect yourself? Well, the first plan of action is to get out in front of things. At least 120 days before your mortgage term expires, you should be speaking with an independent mortgage professional to discuss all of your options. By giving yourself this lead time and seeking professional advice, you put yourself in the best position to proactively look at all your options and decide what’s best for you. When assessing your options at the time of renewal, even if the lender offers you a mortgage renewal, staying with your current lender is just one of the options you have. Just because your current lender was the best option when you got your mortgage doesn’t mean they are still the best option this time around. The goal is to assess all your options and choose the one that lowers your overall cost of borrowing. It’s never a good idea to sign a mortgage renewal without looking at all your options. Also, dealing with an independent mortgage professional instead of directly with the lender ensures you have someone working for you, on your team, instead of seeking guidance from someone with the lender’s best interest in mind. So if you have a mortgage that’s up for renewal, whether you’re being offered a renewal or not, the best plan of action is to protect yourself by working with an independent mortgage professional. Please connect anytime; it would be a pleasure to work with you!
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