1.  Liquidity – the use and control of your investment. Liquidity  Compare the liquidity of typical investments: Cash Same day access via check, debit card, mattress, etc. Bonds / Stocks Same day access, but with possible market timing losses House Wealth HELOC – 30 to 60 days Refinance – 30 to 90 days Sell – 60 to 180+ days

2.  Unlike most investments, you must make timely debt service payments to retain access to the wealth in your house.  If you can’t make these payments, you can potentially lose control of that wealth.  #1 reason for Foreclosure – Disability… Other factors ranked as most common reasons for loss of house in foreclosure: Loss of Job, Divorce and Death. Safety - Foreclosure

3.  Return – the rate of growth on your investment? Return  The Return on wealth in a house is always 0%; wealth in the house can only increase two ways:  Principal Repayment (your wealth)  Property Appreciation (market wealth)

4. $400,000 purchase price $320,000 mortgage loan $80,000 Invested Interest Rate: 7% (30 year fixed) Appreciation: 4% (annual) It appears that $80,000 grew to $1,297,359 over 30 years… Return – Typical Scenario

5. $400,000 purchase price $320,000 mortgage loan $80,000 Invested Interest Rate: 7% (30 year fixed) Appreciation: 0% (annual) Without appreciation, there is only principal repayment. Return - No Appreciation

6. $400,000 purchase price $320,000 mortgage loan $80,000 Invested Interest Rate: 7% (interest only) Appreciation: 0% (annual) Without principal repayment and appreciation, there is no growth. Return – No Appreciation or Principal

7. $400,000 purchase price $400,000 mortgage loan $0 Invested Interest Rate: 7% (30 year fixed) Appreciation: 4% (annual) If you invested no wealth in the purchase of the house, their total wealth at the end of 30 years is the same. Return on house isn’t Return on wealth in house… Return – Nothing Invested What did we leave out?

8. What Was Missing? Loan AmountPaymentPrincipalInterest Tax ReductionNet Cost $320,000$2,129$262$1,867*$700$1,167 $400,000$2,661$328$2,333*$875$1,458 difference($292) *based on a 37.5% marginal tax bracket Payment Payment Difference at 7%: $80,000 $80,000 Difference: +$80,000 Investable Asset Cash FlowReturn (EPR™) Net Cash Flow $80,000($292)4.375%$292

9.  The real issue with Return is understanding your Effective % Rate ‘EPR™’. Return – The Real Issue Would increasing the potential Return on wealth in the house increase your confidence?

10. The Potential Impact of Liability Management We’ll work together to determine which of these two approaches you believe to be most suitable for you. Savings Found Savings Used For 30 Year Mortgage Payoff* Savings Used For 30 Years of Investing ** $150 mo.21.5 years$223,554 $250 mo.18.5 years$372,590 $350 mo.16 years$521,626 $450 mo.14.5 years$670,662 $550 mo.13 years$819,698 $750 mo.11 years$1,117,770 $1,000 mo.9 years$1,490,359 *Standard 30 year fixed at 7% / **Assumes an 8% After Tax Rate of Return

11. Why Focus on the Mortgage Liability First?  The mortgage is the lowest cost liability available to most people.  It is typically tax preferred to other liabilities because of interest rate deductibility*.  In managing liabilities, we look to utilize the mortgage first if borrowing is necessary.  The mortgage is the largest single liability expenses for most people. *You must itemize to benefit from mortgage interest deductions.

12. Step 2 – Payment Consider the different ways to pay on your mortgage. A smart payment approach can impact the Safety, Liquidity and Return of the investment in the house.

13. Step 3 - Availability A simple rule of thumb, multiply current gross income by 4 for an availability estimate. Consider what portion of the wealth might be available to you. liquidity – liquidity – liquidity location – location – location

14. Consider your specific needs today and those in the future. Step 5 - Management All management of wealth in the house is a function of Safety, Liquidity and Return (based on EPR™).

15. Step 6 - Protection Consider that wealth in the house, is only safe if you have use and control. lawsuit divorce disability job loss homeequityline foreclosure depreciation A smart protection strategy is to have a 100% HELOC that is updated when equity increases by 5%.