$1000 extra mortgage payment saves how much interest?
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- čas přidán 17. 04. 2019
- How much interest can be saved by making just one payment of $1000 to your mortgage? I’m going to breakdown the numbers and compare the principal payment to the interest payment to see just how much money can be made making an extra mortgage payment at different times during the mortgage. I will also compare this to a scenario where the money was invested instead, as it is often the case in 2019 that paying down the mortgage is not the choice that will make the most money.
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#investing #mortgagefree #financialfreedom
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your math is flawed, ever 12 year the stock market wipes out your earnings, so your not earning any dividends.
Hello, shouldnt the total principal payment say $199,000? She paid an additional $1000 so the additional payment column plus the principle payment column would equate to the $200,000 loan. Your sheet is showing a $200,000 paid in principle so it looks like she paid $201,000 plus interest for a $200,000 loan. Am i missing something somewhere?
Even though it's 4.5% interest, you'd have paid close to the amount of interest in principal by the end of a 30 year loan.
@@mattx9260 Look at the S&P 500 over a longer period of time. 20 yrs ago in 1990 it was at $325. Now it's at $2950 in a down market.
You should do this again with an intrest only mortgage and take into account inflation eating away at the principal
Paid off my mortgage yesterday. 5 years early. 🤗
Congratulations!
Buy less and pay more!
Enjoy your debt free life
Congratulations! That is a huge accomplishment. Now you will have more liquid cash to put into investments:)
Congratulations!
Congratulations! Can I borrow $500 😃
congrats
Paid my 200k loan with a single income 23 years early. For 7 years we live pay check to pay check on purpose. All our income tax goes to principal for 7 years and I pay $2000 extra each month. I work 3 jobs to make that happens. And all the sleepless nights paid off. Thanks God for keeping me healthy for the last 7 years. And now my family is enjoying all the hardship and dedication we made as a couple.
Congratulations!!! I love financial freedom Stories like this.
Congrats dedication pays off!!!!👀💯
Too extreme fuck that. Money is stupid cheap. Just imagine had you invested all that money instead.
@@MatthewSmith-uf6tr I'm not good as you in investment. All I know right now is we don't have any single debt and we are enjoying it. That 2000 extra that I put in mortgage before. Now is in good shape after 7 years we can purchase another house with cash that's probably my SAFE
INVESTMENT.
@@DrawbridgeFinance Yeah, now your free to pay more taxes with no mortgage deductions. Better buy a second house.
Great advice. Right from the start of my mortgage I paid bi-weekly and paid extra on top of that. My monthly payment was $1200 but I paid $900 every two weeks and twice a year an extra $900 went on the principal. I paid my 30 year mortgage off in 9 years and saved over 100k in interest. Debt free is awesome!
Love hearing these stories. Thanks for sharing and being an inspiration to us all.
TD Li Do you think you now , Owe really owe your home? Think again, You have to pay Taxes on that Home the rest of your life,,..Franklin Said to the American People, There are 2 sure Things in Life! Death And Taxes.
I'm curious what was the loan amount? My wife and I just closed on a house and want to pay this sucker off ASAP
td li @God Bless You 💕🙏💕...I’m praying 🧎♀️ to be able to pay my mortgage OFF within the next 10 years or LESS!!! By the Grace Of God💕🙏💕🥰 I’ve been debt free before so I know it can be done ✅!!! This time I’m REALLY doing it for ME!!🙏💕🙏🥰
Lupe V. Medina @ It’s much less than a mortgage!!!!💕🙏💕
I loved this as I am about to invest in uk property with 70k deposit (plus fees and more savings for furnishing and decorating) to buy my own place, but I am also treating it as my fourth investment, having two spare rooms for lodgers to cover this property mortgage and tax costs... and to build my equity whilst working my day job for my next investment.
Hello, I am in London and am considering investing in real estate as a way to get some passive income. A few years ago, my brother purchased a home in a county outside of London. Because he was unable to find tenants, the property was eventually repossessed. As a result of this experience, I'm concentrating on purchasing real estate in London, where it's quite challenging to obtain a mortgage because of the high cost of the properties. Would you kindly recommend an easy way, where one may try to sustain these cost on mortgage?
First, Jessica you need to have a salary of at least 25k before you will be considered for a mortgage, that you need for properties. If you want to achieve a 75% yield yearly, try looking out for an investment management coach or else you will be competing against professionals themselves.
Generating returns are usually phenomenal. What would have been really interesting would be a proper breakdown showing their costs , services, investors return..
That's an intentional way to live, that's the only way to become debt free. I've already paid off two previous mortgages. Now I'm working on my third and I cannot wait since it has to happen before retirement in four years and I'm already getting there the proficient way, Luckily for me my trader and coach Frost Hilda has been using every opportunity to ensure I benefit from each turn the market takes.
Good luck staying debt free as much as possible in the future.
Absolutely Zachary, contract agreement splits are favorable, I’m also exceptionally well positioned as I’m privy, so that’s a good return deal for any investors creating revenue for more interest.
There should be a class in the last 2 years of high school about this.
Agreed!
Have you ever heard of Dave Ramsey? He teaches this stuff, he even has a class for high school.
The government and banking lobbiests won't allow it.. they wants you to be a slave to the system and be lambs.
I agree. Unfortunately, the educational system focuses more on getting us into debt and feelings. These are real, everyday economics. Awesome video. Thank You for the information.
It is taught in high school, basic interest. People simply don't think about it.
You can never go wrong paying off your mortgage as soon as you can! Get rid of debt! Great video!
So true!
i moved in my house back in 2016, took out a loan for $121,000 after putting 6% down.
my monthly payment is $825, however im single now. and im saving a lot more money, and i got two roommates to move in. im currently making $3,300 mortgage payments per month!!! im literally skipping 9-13 months per month off my 360 month note. i make $60-70,000 per year, and i do not have a car payment, credit card, medical, or student loans!
Nice!!
This effect is known as the “time value of money”. I hear many people talk about that banks require you “to pay all the interest up front” and when you look at a mortgage amortization it certainly seems that way, but the truth (and the secret to the math in the video) is how many times the interest on your loan gets compounded.
You have an annual interest rate when you purchase the loan, say it’s 4% or .04 annually and you make monthly payments. But the interest is not calculated annually, nor monthly... but daily. So every single day of your mortgage the bank takes the balance of the principal and multiplies it by 1/365th of 4% and that’s what you pay in the following months payment. So if you have $200,000 balance at the beginning of the month, each day you are charged 1/365th of 4%, or .00010959 times 200,000 which comes to $21.92 a day you pay the bank to owe them money.
This is why you save so much in interest anytime you pay down a little more of the balance, because every single day there is less principal to charge interest to.
I don’t even think most mortgage brokers could present that information as well as you did. Thanks!
awesome explaination!!!
thank you for it!
😮
I started to make extra payments to remove mortgage insurance from my payment.
I realized that after making normal payments for over 8 years, I still didn't pay down enough to remove mortgage insurance.
I was still 10000 dollars short.
So I started to make extra payments.
Man!!!
That does make a difference.
June 2017 I owned 97k
June 2018. 77k
June 2019 58k
I'll payoff my house in 3 years.
In 3 years I'll be 43years old guy with lot of disposable income.
Jiri Zhanel nice!!!
How much was the extra payments? Did you pay them monthly to the principal?
Did you put it in as a regular payment or towards interest or principle?
How much extra were you paying a month?
Extra mortgage payment towards principal is the way!
I’m doing a 15 years loan instead of a 30 years. I got about 4.5 years left. I might just pay it off in 2 years. Great content man.
I also got 15 year loan interest rate is 3.50..
i got hair better rate 3.15
We chose that rate becuz bank offer to pay 4000$ on closing costs.
Since I landed my new job. I have been paying an extra $1000 every month. Gonna have my 30 year mortgage payed off in 5 years.
Damn! Good job! I love when people take what they want and do it!
Make sure that you are applying the extra $1000.00 directly to the Principal.
Which state u live in
Troy Maddox,But in the end , your paid up Mortgage , Well Actually you dont owe your Home, If you dont pay Taxes your Home will be confiscated By the Govenment
@@tjones2550 how do you apply direct ly towards the principal and not the interest?
If you pay $100 more on your mortgage payment it will equal to one extra payment per year. This will reduce your 30-year mortgage t o 25 years
If you are thinking straight math then yes. But most mortgages don't work like that. In this videos example the guy made 1 payment and it reduced it 3 months and saved around 3k in interest. The sooner you do that the more compounded it will be and the more you'll save. The key is to make sure your extra payments are going straight to your principle and not being counted as early payments. Sometimes you'll have to call and make sure they're handled correctly
This is not right. If I have a P&I payment of $2000/mo, and I put an extra $100 into each month, It will equal 3/5 of an additional payment every year.
Actually 50$ a month will cut 2 months off your loan a year. At least that's working for me
I made 5 extra 50 $ payments and it knocked off 2 months and 924 in interest off the mortgage
That depends on your balance. If you take it a 50k mortgage it will cut way more, if you take a 2M mortgage it will cut way less. There's no universal $=saved time figures
I paid my mortgage off 9 years early. Wasn’t easy but it was the best financial decision I have ever made! Even during this COVID crap I was able to get it done. My mother would be very proud. #Thankful
Paid off mine in December it took me 9 years by sending all the extra overtime I made for 2 reasons first I never got used to the extra money that's was there then is not there now due to being OT second I saw it as for every dollar I send to principle I'll save one or 3 dollars in interest in the long run depending where you at in the 360 schedule payments!! So I'm 42 with no mortgage looking for the next 20 years of investment opportunitys!! If we make it thru the Corona virus lol
congrats on being mortgage free at 42!! that is amazing! let's make some investments together
Good for you!
Paying my mortgage this year in September 2019 9 years earlier.😀😀
Congratulations
@@DrawbridgeFinance Thank you.
Great video ! Just subscribed from Calgary Alberta. Just bought a 300k condo and did 45k down payment and this gives me some great advice! I'll start doing more lump sum payments
Great video, I like the way you break down the difference and when it makes sense to pay down your mortgage vs when it's better to invest then paying down mortgage.
Great information. I just made my first mortgage payment. My goal is to pay extra directly to the principle every month.its amazing to see how one payment effects the whole loan. Thank you for sharing.
perfect timing for me to find this video and channel..lol.you made it very easy to follow. Thank youl!! will check for more info on your channel for mortgage info. keep it coming.
My husband and I pay 1,000 to 1,500 every month on the principal. We will have our 30 year mortgage paid off in about 7 years, I think.... we also put down a large down payment. We know nothing about investing and decided to pay on the principal instead. We want the security of having our house paid off. I admire what you’re doing, amazing!!!
That's a good thing baby should go buy a rental property multi-unit 3 unit 4 unit building but being a landlord isn't for everybody just a few the brave or crazy or the wise or pick all three.😊😊
I dig your format DB, 'just subscribed.
Also I'm 7.5 years into my mortgage. I've been throwing an extra $50-$200 per month direct to principal. I've been doing this since the beginning of the mortgage.
For me it was a major motivator when you see you pass the point where you're automatically paying more principal than interest.
On top of paying it off sooner, I also put funds into investments as well. I enjoy tackling this financial thing from all sides! 💰😀💵
That is our approach as well. We have been hitting our new mortgage with 10% extra every payment and starting in month 15 we start to reduce the extra payment every two months until we hit the point when the interest portion is less than the principal portion without any extra payment and then we just pay the minimum. All extra cash each month goes to investments. Especially now that this down turn has started.
Paid off my mortgage yesterday. 20 years ahead of the original 30 year loan!!!! Best decision.
No, you threw your money away. Did you not watch the video?
@@a46475
There’s a lot more to paying off your mortgage than the financial aspect. Having that asset paid wholly and a place to live indefinitely is a huge sense of relief for many people. I pay extra on my mortgage as well as invest heavily in the market. If the market tips upside down for a few years and all of the sudden you’re struggling to pay the mortgage, those beat down shares don’t look quite so appealing. I like a balance of both. Too each their own.
This is just the video I needed! Took me forever to get this kind of info from the lender!! You explained it so well! Thanks!
Thaaank you Drawbridge!
Love the visuals, you can teach a finance class in high school!!😊.
As I'm nearing retirement my favorite past times are learning how to invest more and definitely lowering my crazy outlandish interest mortgage rate.
Thanks for making my week.
Stay healthy n blessed.
Thank you for appearing on my recommended videos. I need great content such as this! Great point on making extra payments early, we're on our 2nd year of mortgage, planning to get rid of all our other debts while making extra payments on our mortgage. Hopefully in 15 years, we'll be debt free!
That sounds like a great plan!
Finally a practical video seeing the real impact of the numbers ! Thanks so much!
You’re welcome. Thanks for commenting.
Bought my home at 20, followed dave, ill be paying my home off 18 years early just need a few more months to save! Blessed
Very good job explaining the math on making extra principal payments.
One of the best videos on this subject... It was simple, the grapgics were good and very soothing and sennsible way of speaking. Thanksnfor the video
Thank you:)
Just paying off EARLY is awesome!
Any savings would just be icing on the cake.
Great video! I had a business professor in college who had a similar, but bolder theory that he actually did - rent a home, and invest the difference between the cost of renting and the cost of buying. By year 30, you can pay cash for the home from investing. Risky, but the math lines up.
You are a WONDERFUL presenter! It was soooo easy to understand everything. Thank you!
Thank you!
The interest gains on an investment are taxable, the interest savings on the mortgage are not taxable income,. So even if you could get a higher return on an investment, you may not be making more money.
Very true!! This should all be part of the strategy! 💰 Join the club for trade alerts and private chat: www.patreon.com/drawbridgefinance
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Smith Manoeuvre? Leverage the
equity developing in your home. Reap the tax perks.
Paying more in interest for a tax break is like paying a dollar to save a quarter. Would you rather pay an extra $1000 dollars in interest just to get $ $250 back at the end of the year? I much rather have the extra $1000 dollars to invest or apply to the principal.
@@deepdoodoo3252 my mortgage payment includes principal, interest, insurance, home taxes. I lose the % on the mortgage, feed the market for a %, and use the delta market vs. HELOC to pay the interest only on the HELOC. In the end you can continue to pay interest only or cash in your growth expanded portfolio, but why you would beats me.
Netting 7% annually for thirty years after costs is a big ask, but gains should be tax free using a capital gains allowance. Great content and along the lines of what I advise my kids, along with how to be positively, happily and productively engaged in order to make an income
Great vid man, wife and I are about to close on our second house...we definitely will keep this info in mind! Thank you!
I'm doing a new video o the effects of payments towards two different mortgages.
I have been trying to understand how extra payment work but never ever got it until now. Your explanation is the best! Thank you 😄👍🏻👍🏻👍🏻👍🏻
Thanks
About to sign for a mortgage at 3% flat 30 fixed this week, and I’m totally using this! Though I might try for a bit more paid down ($1200 or $100/mo saved after the first year) looking forward to paying that loan off in no time! Rates are nuts now!
I love content like this. You did a great job explaining the different factors affected by extra payments. Once I realized an extra $100 payment a month would shave off over 4 years from my loan it became my new standard. Tinkering with these amortization calculators is fun.
Glad you enjoyed it!
totally agree!!! best of luck paying your place off! i just bought a place so im at square 1 right now :)
@@camiiii31 you can do it!
Great, informative video... When I bought my house 16 years ago, I took out a 5/1 ARM, as I did not plan on being in the house too long. At the time, the market was hot... as were prices... and I did not really like the house... but it was close to work, in a nice neighborhood, and in my price range... so I bought it. Then came the housing crash in 2008. I was VERY upside down on my mortgage... so I was stuck there. Luckily, once the mortgage started to adjust, it worked in my favor & my interest rate went down for several years. When things started to improve, I looked into doing a re-fi. I timed my re-fi pretty good. I got into a 15 year fixed at 2.75%. Due to the shorter term, my monthly payment went UP... by about $500 per month. I decided to try & whittle down my mortgage balance somewhat aggressively. I took the approach of making an extra mortgage payment per year... so I divided the extra payment by 12, & add that to my monthly mortgage payment. Yea, it hurts (especially in Southern California), but my balance is dropping pretty quickly. I also maxed out my 401k contribution at work. In addition, I have a $400 monthly draw into my brokerage account/Roth IRA... so I kinda still live like a college student... but it's ok. I'm 9 years from retirement... and when I DO retire, my house will be paid off & I'll have enough money in the bank to live comfortably... I hope!
Nice.
Awesome video. I just bought a house in June. My house was 160k. 4% interest for 360 months. Currently I have paid enough payments to where I don't have another payment due until Jan. I plan on keep making my regular payments and extra when I can but its cool to see how much money Ive saved
Thank you for posting this video - I really enjoyed it and as someone who is only about two years into paying off a mortgage it really was educational.
Just earned yourself a new subscriber. Great explanation of how this works.
Welcome Jim!
Love this video. It's all part of a portfolio of risk and risk management. My wife and I treated our house like a "super safe investment" and once it was paid off we allowed ourselves to invest in more aggressive higher risk (and hopefully higher reward) investments thereafter. It just made us feel good, like owning insurance to know that we actually owned our house when we are otherwise investing in stuff that could have a bigger downside.
This is a great video. Simple, clear illustration of the value of compounding. Easy enough for anybody to grasp.
Thanks!
I havent even watched the full video yet, and I just want to say I love your disclaimer!
So much value in this video - purchasing this spreadsheet from you. Don't even care if they have free ones on the internet - have to support your work after obtaining so much value. Thank you!!!
Thanks!! Let me know if you have any specific questions!!
Why purchase a FREE amortization spreadsheet? I made one with a well known formula. Save your money!!
Clutch info
Clearly thought out
Concisely explained
Subbed.
Thanks.
Subscribing. I love this kind of analysis! Too many CZcamsrs just talk and don't explain the monthly long term numbers! love it. Also, love the comparison between RE and Stocks since all of us usually have a mixture of both. thanks!
Welcome kacie! Let’s get rich together!
I just sent in my 1st extra $550 on principle and gonna do it every month! Can’t wait to pay mine off
Congratulations!!
I like the idea of paying off the mortgage. I have been at the investment game for years don't forget the money you make on a 1000 dollar investment is taxable income. 1000 cash towards the mortgage is a guarantee.
Wish I had thought this one out years ago. Bought with a 30 instead of a 15 and now 13.5 years in, still owe a ton of money instead of being close to having a paid for house.
Life.
13.5 years into 30 is better than you think. Now any extra payments will still help pay it down faster. Good luck with your journey. Keep my posted when you are mortgage free.
Great video love the comparisons between saving versus investing!
I love this....I have spent the last 4 years working on a strategy for "paying off" a mortgage early, while at the same time increasing liquidity and increasing your overall assets! This is right up my alley!
Purchased my 3rd home in Nov of 1977. Paid on it until 1983 and decided to pay it off when I was 33. I was in a job that gave me an annual bonus that varied. In 1983, 1984, 1985 and 1986 I applied all those checks to my unpaid balance on my mortgage which I think was 7%. Paid off my house on Tuesday, March 11, 1986. There was a weight lifted off my chest and then I could invest my house payment every month. My point is that the faster or sooner someone can pay off their home is the faster or sooner they have a lot of investable cash that they are not paying in interest. A good example would be if Alice paid for her house say 10 to 15 years in and then saved that interest + the house note going forward. I know I would not be in as good of shape if I had house note most of my life. I did until I was Woke in 1983 ( when I realized I should be getting interest and not paying it ) and then paying it off in 1986. .
Thanks for sharing your story. I can't tell if you watched my whole video or not. Either way, it is why I also am choosing to make extra mortgage payments, as I stated in the video.
I did in fact see the end and I can only say that paying my house off was the single best financial thing I ever did. Not having a house note for the last 33 years enabled me to invest more because of the discretionary monies it gave me. Everyone is different, but being 36 when I paid off my home and with a wife and two small children the concern of a home was then lifted. A tremendous feeling of relief for me.
Damn, you have it good. I never had 50$ in my pocket until I was 18.
I paid my mortgage in 7yrs, no holidays, no restaurants, BANG, done, rent it out $710/week.
Do whatever it takes and get that Mortgage OFF the Books!!!!!!
@@mikebingham9700 Now own 4 houses and a wood farm debt free, just bought wife a new HONDA CRV cash, have 18 months living expenses banked.
@@mohammadwasilliterate8037 EXCELLENT!!!!
This is crazy good. I have two years to buy a house and I'm taking my time to learn stuff like this and as much as I can. Thanks for this info.
Yep, I am about to make a video on this topic and you and I think the same way. Great video!
i had no idea that u can reduce ur mortgage like that i have not bought my home yet but u sir just saved me so much money. thank you so much man i feel rich right now
So glad I could help!
I really dig your style my man. New sub here.
Welcome!
Me too😎😎😎😎
I have yet to see a drip being allowed with just a $1000 investment. That is a very big detail that is missed on the comparison but your point doesn’t change. Good video that made it easy for people to see the power of long term investing.
Great information here! Everyone should take a class like this before purchasing a home.
We started with a 180k mortgage amortized over 25 years. At year 5 we shortened the amortization by 5 years. This made 15 years remaining instead of 20. Our payment increased by $37.29 every 2 weeks. Not only does it save 5 years of payments, but an astounding 45K in interest over the 15 years. Our interest also dropped from 4.49 to 2.69 percent at renewal time, so some of the saving is from the reduced rate.
Good examples. Its something about paying the mortgage off early that appealing vs investing into stocks. So I would more than likely do what you are doing and pay extra towards the mortgage early if possible as well as invest in dividend paying stocks. Finding a balance that works on a individual basis👍🏾
Balance is great!!
Thanks was trying to explain this, but you already did the work for me! The key is to Invest the money, people have a hard time seeing a lump of cash and not spending it.
Absolutely! That is why my rule #1 is....
For my circumstances this is the best information I have read today.
So glad!
My aunt and uncle paid their house off in less than 15 years by paying a little extra on their mortgage every month. Some months it was only $50, and others it was $100-$200. Any extra money they had went to the mortgage. Making extra payments that go towards principal makes a huge difference.
I like this example. Thank you for posting/
Excellent analysis and really accurate calculations... (first video I watch and convinced me to subscribe, smart) However, here's my catch... putting the extra payment towards the mortgage basically converts to a really safe way of savings on the interests (almost assured), on the other hand... An investment with a 7% return will not be as safe or assured, as almost all investment will depend on your instrument, market conditions, etc... So, I just want to mention this as a side note for the average person. If you are an individual dedicated to understand your investment portfolio & strategies and keep up to make sure you will maintain a decent return (at minimum, higher than your mortgage rate), it's absolutely reasonable to invest elsewhere... Just mentioning for the average reader/viewer who does not plan on maintaining a portfolio of investment instruments, then, it'll probably just be good to at least save something by putting it towards your mortgage interests. Again, really good job on the video.
Thanks Roberto!! Well said information.
Amazing vid, really helpful !!!
Thank you, keep up the good work :)
Awesomely helpful analysis! Cheers.
I wish they taught me this back in school. I learn more useful stuff on youtube than i ever learned in highschool. I have never had to use the pythagoras theorem once after highschool
Me too! That’s why I’m sharing now.
As you have said, many factors have to come into play to select which route is better for yourself. There are a few criteria to should be considered when deciding which route to go for.
Is the rate of return of investment higher than mortgage interest?
Tax on capital gain by government depending on countries. If there is such a tax, the returns and rate of investment have to be higher than both tax and mortgage interest combined.
Is the climate/confident of investment good? Is the economy safe to invest?
Thanks for the simple, yet detail explanation of how compounded interest and investment of a 1000 dollars early on makes such a huge differences in the end of 30 years.
Awesome job explaining why we should invest instead of paying down our mortgage when you have a low mortgage rate. Great Job
Glad it was helpful!
love your examples.. starting at 4:45 makt it very clear!
Another great video how dividend investing is more profitable then paying down mortgage.
I was going to put 5 k last year on my 340k mortgage until I watch your old video about paying down mortgage or investing.
Well I decided to put 5 k on my tfsa investment account, not my mortgage. My interest rate for my mortgage is 2.9% fix rate and my investment return to date (7 month) is 13% growth overall and 5.3 % average dividend return.
I know If I’m ever financially in crisis, I can withdraw my tfsa tax free. Hopefully it never happens.. if I pay my mortgage down at this state I can never get that money back if I’m financially in trouble.
It’s not for everyone, and I do get this from your videos. This is working for me at my stage in life. Young, and building my family future.
Thanks!
WOW! That is an amazing return. I had a bit of negative year in 2018 (with my options) so I'm glad to hear that you picked better than I did.
TFSA only for Canada?
Don't know what a TFSA is? I have a video for that czcams.com/video/WYZqrOnp7fo/video.html
I pay extra on my mortgage principal biweekly 👍 I read an autobiography by Geeneen Roth who lost her life savings when she was in her late 50s (approx. $850k-$1M I can't quite remember) to Bernie Madoff's Ponzi scheme. She still had a mortgage on her house (approx. $300k). Her biggest regret was not paying off her mortgage before investing heavily. She regretted it SO much. For me, the security of owning my house is worth it. Besides, with a mortgage you are dealing with compound interest in reverse. That low 3-4 percent mortgage interest rate isn't that low when you consider that ❤️
3-4 percent is low. Use the rule of 72 and tell me it's not.
and don't invest in ponzi schemes.
I am also currently making extra mortgage payments but only because I am in my first year of this mortgage.
@@DrawbridgeFinance Lol. Yes, I stay away from Ponzi schemes whenever possible 😀 I invest in low cost index funds from Vanguard in addition to my pension contributions. To each their own, however for me home ownership is worth it. Maybe it's my female security gland acting up, as Dave Ramsey suggests. Either way I definitely think paying extra on the mortgage in the early days is best. Later on it's up to personal preference. Personally I want to own my house asap.
@@LMCEK Love Dave! Sounds like you have a good solid foundation. Glad you're watching and commenting. I would love to build up this page with more people like yourself who are educating themselves and making informed investment decisions.
lots of good information. I,ve been paying 100$ extra a month for 2 years now, glad to see it will help in the end.
Extremely easy voice to listen to. And the examples are the type of math I love to play with on mortgage calculators. This was right up my alley because I paid a year worth of extra payments after refinancing my original 30 year down to a 15 when I still had 22 left to go. Saved on the rate as well by doing so. Shorter term, lower rate and extra payments. Looking forward to being free very soon. Investments are wonderful of course but setting up for retirement with no cash outflow for a mortgage is necessary to truly be retired.
The net-present-value of $2,700 paid over 30 years is practically zero. The investment angle is much better. The key is to buy a house that you can easily afford, put enough down so you don't pay PMI and you're protected against any market value decline. Then get a 30 year mortgage and just pay it on time. Take the excess cash and invest it. Many people want to pay off their homes so they have security and don't have to worry about losing their home, and that's understandable though the risk is lower than they realize if they made the right choices when they bought. Also, if you have the kind of life events that cause people to lose their home, you might lose it anyway. Finally, your risk is greatest during those number of years yiure trying to pay it off and much, much lower in those later years when your income is much higher and you're more employable. The other reason people choose to focus on mortgage rather than investing is that they don't know how to invest or believe it is a scam or too risky. And it can be hard to learn. However, if you choose the pay off mortgage plan, and your neighbor chooses the invest plan, when you're both retiring, you'll see the difference in livelihood clearly.
Paying anything extra the first 5 years of a 30 year Mortgage has the largest effect. Interest is front loaded. The first payment only sends like $15 to principle.
even worse on a 30 year mortgage, nobody should be taking 30 year mortgages. 15, 20 tops. in my opinion... i also don't agree with people financing vehicles for 7 or 8 years,... then trading after 3-4. vicious cycle of debt and bad decision.
Very insightful that amortization chart looks so scary in the beginning...
I re watched this video and it opened up my mind on how each scenario can save you money. Thank you for making this video.
Thanks!!
Well explained! U got yourself a new subscriber in Calgary 👊
Love Calgary!!! Thanks for watching.
Awesome video! I'm new to investing (other than retirement accounts) and am thinking of buying a house soon so this was absolutely fascinating to me. The only thing I was not convinced about was finding a reliable stock that pays a monthly 7% dividend these days.
Enjoyed the video brother.
Great Video, good quality too. Thank You. Subscribed.
I’m watching this in May 2020 and it seems nice to not depend on an investment vehicle being healthy and instead shave off of a mortgage that will never be kind to you in a pandemic, ha. I know your info is solid and generally sound but it’s hard to ignore the predictability of a mortgage pay down. (Great video, I just subbed.)
So glad you enjoyed it.
I enjoy videos like this! Nice job! Although I'm of the school of thought in favor of paying off the mortgage early and not investing that and thinking I'm going to make more than paying on the mortgage :D I still appreciate everyone's point of view.
Hey thanks for the video!
I am a few years into a mortgage right now and within 6-7 months i plan on dumping all and any extra money directly into it to see how quick i can pay it off
Great video - I’ll keep investing and pay what’s required on the mortgage. Thanks for the content!
thanks
Thank you for the video, clearly explain everything.
Great info thanks, best of luck.
Thank you!
Boy! Very insightful! I'm in escrow right now on my very first home, actually condo but essentially my home! I am definitely going to do this for my first year of paying my mortgage. I am also going to use the outline of your spreadsheet! Thanks for your video!
Thanks for the comment and congratulations on your new home!!
This is incredibly valuable info- thank you! I definitely wasn’t as “swift as Alice.” I was told once to make “an extra payment” which I did; however, it was not specifically applied to the principal and did not make a notable difference in my mortgage payment (that I’m aware of).
Thank you so much that was the best video I have seen ever and it was very clear and straight to the point. Once again Thank you!
Thanks for liking and commenting:)
Would be a good video to perform a continual extra payment analysis to pay it off in 15 years.
Having the financial freedom of no mortgage payment is huge and can’t be defined by solely by numbers. The reduced stress and flexibility of working a job that you like vs what pays the mortgage is HUGE.
Totally agree! You might think you are making money along the road, but what if you get laid off and whatever you are investing can't cover the mortgage payments and you are being forced to foreclose. I think for average Joe in the middle class, pay off ASAP and then use the extra to invest is better.
Very informative! Now imagine paying an extra $1k to your mortgage a few times instead of just once... all the extra money you save on interest and the overall paydown of the loan. That frees up more capital than your investments would likely garner (unless you had a formidable and very consistent return on that investment), and allows you to have access to all of of your income way earlier (assuming no other debts). Then, the sky's the limit.
It can be a very powerful strategy.
My mortgage was $130k I sent 1k extra a month.... paid it off in 7 year..
Nicely explained! Greetings from Burnaby!
LEGIT CAMERA! Thank you for the great info !
Levi did a very good job explaining the math. He's in Canada (go, Maple Leafs!), but here in the USA, there are 2 other calculations that should be considered to see the end / net results. First, don't forget that there are capital gains taxes that will need to be paid on growth of the investment. Second is the benefit of being able to deduct mortgage interest from a person's taxable income. Once those two factors are taken into consideration then you weigh out the decision remembering that making an extra payment into the mortgage has a guaranteed return whereas investing money requires some risk.
Thanks Mace! Those are great additions. I've always wished we had tax deductible mortgage interest like you do.
Go leafs!
Good vid! But my concern is putting the $1000 towards the principle of the bank note IS a guarantee of your investment where as $1000 in the stock market has no real guarantee. Higher risk is higher reward for sure, but I like the "sure thing" of the extra going into paying off my mortgage. Great video, great content. Thanks for doing this!
Absolutely agreed. We have to always weigh the pros and cons of each choice. That’s why for the first year of my new mortgage we have been making over $850+ in extra payments. Will stop that soon and get back into padding our investments instead.
Thank you for being very clear in your information.