Sunday, February 19, 2006

Leverage Edition: $1.01 - The Basic Plan

A little title humor there, folks!

Continuing on - 50 year old couple, bleak retirement prospects, but nice home, mostly paid for.

Well, WAS mostly paid for - now we approach the bank. Your current home value is $400,000, against which you've got a $100,000 existing mortgage - the bank agrees to a 30 year refinance of $300,000, at 6%, which would increase your current payments by $1,199 per month, which we can find out by using this Mortgage Calculator. Yiiiiiikes!

But let's see how we can make that extra $200,000 go to work for us, by the power of leverage. We are going to use that money to buy some Widow and Orphan Stocks that pays high dividends.

By going through my local newspaper, with its condensed stock listings of large companies listed on the NYSE, I can pull up a number of large company names that I recognize, where the dividend yield is above 4%.

If I can find enough of these companies, and ones that have generally increased their dividend payment over time, then I can - after a spell - get the mortgage to pay for itself. After a bit more time, I can start to get a positive cash flow, because the dividend payments become more than the loan payment, and after a while, I'll own a whole lot of stock that has increased in value, and is now loan free and spinning off even more in dividends.

More later ...


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