How to Pay Off Your Mortgage Early (The Ugly TRUTH About Mortgage Interest)
Vložit
- čas přidán 9. 06. 2024
- Learn the TRUTH about mortgage interest, and how to pay off your mortgage early. If you're wondering "How much interest will I pay on my mortgage?), this video shows you. Learn how mortgage interest is calculated, how mortgage amortization tables work, and ways to pay down the mortgage faster (I compare 4 mortgage payoff strategies). Learn how to build a house mortgage amortization schedule in Excel. Beware of the Velocity Banking videos - they'll try to convince you to take out other loans and use them to payoff your mortgage early and faster, but if those loans have a higher interest rate than your mortgage, they won't help.
Timestamps
00:00 - Intro
00:55 - How Interest Affects a Mortgage
02:46 - How to Calculate Mortgage Interest (Build a Mortgage Amortization Table in Excel)
07:16 - How to Pay Off Your Mortgage Early (4 Strategies)
10:57 - Summary of 4 Mortgage Pay Off Strategies
Link to the Spreadsheet used in the Video:
bit.ly/TheWilliamLeeShow_Mort...
This video is meant for educational purposes only and is NOT FINANCIAL ADVICE.
Your host in this video has been the CFO of several software companies and offers a lifetime of business experience to his audience. Will has an undergraduate degree in Economics, an MBA in finance from Cornell University, earned the CFA charter (Chartered Financial Analyst), and has worked as an equity research analyst at top Wall Street firms in addition to his experience running entrepreneurial companies.
***** Recommended Products *****
Get FREE stock from Webull. U.S. citizens only:
a.webull.com/gsHteSqTzj4blNrkEt
***** Music & Video/Still Photography Used in Making My Videos *****
MUSIC - Epidemic Sound: share.epidemicsound.com/9ziu1r
VIDEO/STILL CLIPS - Envato Elements: 1.envato.market/EK9RAX
***** Equipment Used in Making this Video *****
Camera amzn.to/3wuZNL4
Lens amzn.to/3j9BLlv
Light Panels amzn.to/3RbPepB
Microphone amzn.to/3DdssIc
Office Chair (most comfortable chair ever…. Should have bought this years ago!) amzn.to/3J9mCLP
As an Amazon Associate, I earn from qualifying purchases.
#payoffdebt #getoutofdebt #williamlee #thewilliamleeshow
What strategy would YOU recommend to pay off a mortgage fast?
Get FREE stock from Webull. (U.S. citizens only): a.webull.com/gsHteSqTzj4blNrkEt
I would take out a 17% LOC and chunk the mortgage $10K at a time to pay it off in only 7 years.
Kidding! Here's how I did it:
1. Bought less house than I could afford.
2. 15 year mortgage
3. Created a budget where I could throw extra money at it each month.
could it be paying more off your mortgage earlier? AMAZING!
Thank you for this excellent explanation! This is exactly how I feel about paying off the mortgage. Recently I’ve seen a video by James Johnson, discussing reasons for not paying off your home (titled: Paying off your house early is a mistake according to math)… got to admit it left me a bit confused and maybe even angry… would love to see what you think about it. Here’s a link: czcams.com/video/J2ZC9ZBZA3s/video.htmlsi=xkfr2flxxvDTUUHv
Get a second job and throw every extra penny at the principal every 2 weeks.
I recommend paying extra principle payments as much as you can,even if its just low as $20
My payment was $2415 month. We would pay an extra $500 a month towards the principal. We currently just refinanced to get a lower interest rate and to get off of PMI. Our new monthly payment is $2915 a month. We plan on still paying $3700 a month but are now going to do bi-monthly payments.
Try making the payments quarterly, in addition to adding, a payment each month and watch how fast the payments begin to drop on your amortization chart. I've got one more year after starting about a year ago. The timing of the payments is everything. This is the only thing that they all leave out when doing the videos.
Instead of extra payments, I suspect you would be better off putting the $782 per month into shares of Apple and Amazon. The video more or less describes how you can get out of being a debt slave When you have cash you have options. Smart people hold on to cash. They don't instantly shove it toward debt. Once it is used to pay on the debt, it is no longer accessible.
One part of this vid that I do like is the idea of not taking on a large debt in the first place. I think there should be a balance between the amount of debt you incur and the amount of cash you can invest. I would rather have a $1000 house payment and $1000 going into stocks than a $2000 house payment and no stocks. If you have cash and you’re confused I will suggest you contact a finance advisor
Sharon Ann Meny is the licensed advisor I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
Presently, mortgage rates have reached their highest point since the year 2000, spanning a period of 23 years. Considering inflation trends, there's a possibility that this figure might continue to escalate. To provide context, the 30-year fixed rate was only at 5% around this same time last year. Faced with this scenario, the question arises: should I continue waiting in anticipation of a potential housing market downturn before making a purchase, or is it more prudent to shift my attention towards the equity market?
Similar to any other investment avenue, the stock market requires a substantial level of expertise to sustain profitability. While my approach has predominantly involved buying and holding stocks, my portfolio has been in a state of decline for a considerable period. Achieving substantial gains necessitates consistency and the periodic restructuring of your portfolio to adapt to market dynamics.
I believe that holding was comparatively simpler in the 1960s, and the landscape has become more complex nowadays. Those who consistently generate gains in the present era are often seasoned pro. This is why, for the past five years, I've enlisted the services of a fiscal guide. Their expertise has been instrumental in consistently building and managing my portfolio, with an eye toward securing my fiscal
I fully recognize the significant advantages of collaborating with a pro, but thus far, I haven't identified the right one for myself. Could you provide more details about the fiscal guide who has been guiding you?
Vivian Carol Gioia is the licensed advisor I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
I find this informative, curiously explored Vivian Carol Gioia on the web, spotted her consulting page, and was able to schedule a call session with her, she shows quite a great deal of expertise from her resume.. very much appreciated
Prices are too high. With rates not subsidised in ’24 and mortgage still high , currently seeking alternatives to maximize savings without an RV move or taking a loan. I’m seriously contemplating the latter.
Affording our mortgage is tough as well. I have suggested cashing in, renting or relocating, and investing the rest in the stock market.
If you can afford to relocate, you should manage the mortgage.
if you are looking to invest in the stock market, I suggest you Consider a fiduciary with mortgage-backed securities knowledge for guidance. Prices today may look like dips tomorrow.
That's a smart idea. A financial advisor can help us assess our current financial situation, including housing costs, and develop a plan that aligns with our goals. Especially during times of market turbulence, having a professional guide can be invaluable.
Please how do I find and contact this financial counselor ?
I paid up all my mortgages in 2yrs while working with a Financial Adviser. I’m 50 and my husband 54 we are both retired with over $3 million in net worth and no debts. We got to realize that the secret to financial freedom is making better investments.
If anything, it'll get worse. Very soon, affordable housing will no longer be affordable. So anything anyone want to do, I will advise they do it now because the prices today will look like dips tomorrow. Until the Fed clamps down even further, I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off.
Home prices will come down eventually, but for now; get your money (as much as you can) out of the housing market and get into the financial markets or gold. The new mortgage rates are crazy, add to that the recession and the fact that mortgage guidelines are getting more difficult. Home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes.If you are in cross roads or need sincere advise on the best moves to take now its best you seek an independent advisor who knows about the financial markets.
Impressive can you share more info?
Credits to 'Carol Vivian Constable' she has a web presence, so you can simply
She appears to be well-educated and well-read. I just ran a Google search for her name and came across her website; thank you for sharing.
I told my wife to setup by-weekly payments. She set it up for full payment every two weeks. lol. It was several years before I realized what she set up. On the bright side we paid our house off in 10 years. Best mistake she ever made!
Ha, I see the 'mistake' your wife made, bless her heart! 😄
Would have been better if the extra payment was principal only.
@@lynaejohnson6467 If the wife ‘accidentally’ set up a full payment bi-weekly, then I presume the 2nd bi-weekly made a payment directly to principal only.
That’s how we have been doing a for a few months now. We pay a little more than double of the month’s mortgage payment each bi-weekly, the first payment pays the principal and interest and a little extra towards principal. The second bi-weekly payment goes all toward principal. If there is a month or two month gap to the next due mortgage payment, any bi-weekly payments in between goes directly to principal.
We have been able to chip down over $13K and quite a bit on our mortgage balance lightening fast in the past 3 months. Crazy! Wish I did this sooner 😎
😂 oh my lanta! It’s amazing y’all adapted to that and you didn’t even realize the money was gone! Great idea! 😂 maybe I’ll do that to my husband without his knowledge! 😂
Most lenders will hold the payment until the full payment is received. So, you can pay half, they hold it, then when they receive the next payment they appl the full payment so it doesn't save anything. Very few lenders allow half payments and apply them.
In eleven minutes and twenty seconds, you clearly explained loans in a way my years of schooling never did. Love ya, man.
Thanks so much!
Your clear explanation has made more sense to me than anything I have ever read or heard of previously. Thank you!
Did you attend 7th grade? All of this information is taught in 7th grade
That's because school doesn't even teach you anything about loans or finance...
That is a non-sensical statement...
@@lr4672Really? What 7th grade class is that?
My husband and I were fortunate enough to be able to pay off our mortgage early. We were both still working, and took the payment amount that we had been using to pay off our mortgage faster and we put it straight into investments. We were able to retire early because of almost 7 years of putting away what would have been our mortgage payment as well as maxing out our 401K/403B plans. Thankfully we were taught by both of our parents the value of living within our means. Thank you for your advice. I know it will help people.
we are interested in investments that could set me up for retirement , I mean I've heard of people that netted hundreds of thousands during these crash, I listened to someone on a podcast who earned over $650K in less than a year, what's the strategy behind such returns?
You’re right! The current market might give opportunities to maximize profit within a short term, but in order to execute such strategy , you must be a skilled practitioner.
A lot of folks downplay the role of advlsors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve notwithstanding inflation, from $275k to $850k.
How can one find a verifiable financial planner? I would not mind looking up the professional that helped you. I will be retiring in two years and I might need some management on my much larger portfolio. Don't want to take any chances.
Svetlana Sarkisian Chowdhury is the licensed fiduciary I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment..
Thank you for the lead. I searched her up, and I have sent her an email. I hope she gets back to me soon.
Interesting that the government admits that housing inflation for 2024 is 3.4% but when it comes to Cost-Of-Living-Adjustment (COLA) for Social Security distribution the housing inflation rate for 2024 was on 2.2%??? Great point William, Question is how does SS income thresholds meet up their mortgages!
It's best to consult a financial advisor before making decisions. As a business owner and eBay reseller, I can attest that we are almost in recession and everyone is running out of money.
@@Aurierserge50 It's gotten especially difficult since the pandemic, hence why I decided to use the expertise of an advisor, my spouse kicked against the idea initially, but oh well guess who's best buddies with our advisor now.
@@Aurierserge50 I've been getting suggestions to use an advisor, but the challenge has been knowing how to find a decent one. I'll appreciate any recommendations if any.
@@ericmendels Only one person comes to mind, the popular lady Alicia Estela Cabouli. She's been able to gain some reputation with decades in the financial industry, so it shouldn't be a hassle to find her basic information on the web.
@@Higuannn Thanks, I just googled her name and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a call.
The value of waking up on the first of every month for ther rest of your life and NOT having to pay the mortgage is priceless. We paid ours off in 9.5 years. Happy we did it.
Just don’t forget Uncle Sam and his cronies bc they are NEVER paid off lol
That value is about $1M less than you would have had if you put it in the market over 30 years.
@@CobaltLobsternot true, it's a guaranteed interest rate. Many people lost huge in the tech sell off of 2000, and the GFC in 2008. There is likely another unpredictable drop coming soon. You are also shortsighted in that you assume the only housing gains are in the interest in the housing loan. There is also increases equity in the house over time that you don't fully get to enjoy if you don't have it paid off.
@@CobaltLobsteryou can easily lose more than you invest. That will be realised with experience. Good luck.
@@markturner6755 if you generalize and don't chase specific stocks, your money will always net increase in the long term right? Such is the stock market. Granted, depending on your interest rate of the mortgage vs your ROI it may be worth it to pay down principle instead of increasing investments.
Wife and I paid off the house two years ago. Our mortgage payment was $1500 per month. Eight years ago we started paying $2000 per month on the mortgage and really started to notice the principle balance go down after year three. On a thirty year note, we paid if off eight years early. I am 54 and my wife is 50. Still have to set aside about $450 per month for property taxes. The feeling that one gets for having that mortgage note gone is priceless.
I wish there was a mathematical equation for “that feeling” so many people only care about the numbers and don’t realize the beautiful freedom of being free.
Congratulations! Well done
Simple math eludes far too many people.
@jerrylundegaard2592 what math
@@andersonandrew112 Well, let's start with the easy. Here we go, pay attention, 1 + 1 = 2.
I lost over $70k when everything started to tank. Not because I was in an exchange that went belly up. I was just stupid to hold and because that's what everyone said. I'm still responsible. It just taught me to be a better investor now that I understand more of what could go wrong. It took me over two years of being in the market, I'm really grateful I found one source to recover my money, at least $10k profits weekly. Thanks Natalie Strayer
Wow. I'm a bit perplexed seeing her been mentioned here also Didn’t know she has been good to so many people too this is wonderful, i'm in my fifth trade with her and it has been super.
You trade with Natalie Strayer too? Wow that woman has been a blessing to me and my family.
YES!!! That's exactly her name (Natalie Strayer) so many people have recommended highly about her and am just starting with her from Brisbane Australia🇦🇺
I'm new at this, please how can I reach her?
Her good reputation already speaks for her .I’m also one of the beneficiary of Natalie Strayer. So happy I gave it a trial after being skeptic of the process.
🌹I'm 55 years and I retired at 51. I was able to do this because I understand four pricinciples of financial planning success think long term with goals and investing, spend less than you earn maintain liquidity (an emergency savings) minimize the use of debt
Success depends on the actions or steps you take to achieve it. Building wealth involves developing good habits, such as regularly setting aside money for sound investment...
Money invested is far better than money saved, when you invest it gives you an opportunity to increase your financial worth
The wisest thing that should be on everyone's mind currently should be to invest in different streams of income that doesn't depend on government paycheck. Especially with the current economic crisis around the world , this is still a time to invest in Stocks, Forex and Digital currencies
I keep seeing how lots of people testify about how they make money from stocks, Forex and crypto currencies (BTC) and i wonder why i keep losing.. Can anyone help me out or at least advise me on what to do 🙏.
Even with the right technique and assets some investors would still make more than others.. As an investor, you should've known by now nothing beats experience and that's final. Personally i had to reach out to a financial adviso (Ava Brenda Harry) for guidance which is how i was able to grow my losing account back to $125k , withdraw my profile right before the corrections and now I'm buying again.
I have a 3% mortgage interest rate and suddenly became liquid from the sale of a business and i am confused if i should pay off my mortgage or invest in the stock market.
Keeping a 3% mortgage and investing cash in the market, growing at 10-20%, is basic math. Look up dividend aristocrats, companies with a 25+ year dividend track record. Also, its advisable you work with a financial advisor for a well-structured portfolio.
I agree. Based on personal experience working with a financįal advlsor, I currently have $2 million in a well-diversified portfolìo that has experienced exponential growth from when i started. It's not only about having money to invest in stõcks, but you also need to be knowledgeable, persistent, and have strong hands to back it up.
Your advisor must be really good. How I can get in touch? My retirement portfolio's decline is a concern, and I could use some guidance.
I'm cautious about giving specific recommendations as everyone's situation varies. Consider independent financial advisors like "KRISTIN AMBER LANDIS" I've worked with her for 9 years and highly recommend her. Check if she meets your criteria.
I looked up her name online and found her page. I emailed and made an appointment to talk with her. Thanks for the tip
Great video, but I think it may be useful to show how powerful getting started early is. For instance, an early payment of $500 takes two months off whereas a $500 payment in year 23 does not move the needle nearly as much
Exactly!!!! Your paying the bulk of the interest in the early years. Chip away at that interest while it’s young
Make sure you are paying towards the principle though. IIRC, some banks are tricksters.
@@easyBob100what do you mean?
@@steveplays5408 Maybe it wasn't true, but I've heard that if you don't tell the bank to put extra towards principle, they will apply it to interest first. IIRC.
That's not how it works but sometimes the banks will penalise for early payments (e.g. increase interest or add a fee). Check the small print.
THIS WORKS, I’ve done this on two homes. I started early in the loan and even paid extra when I could, or times were good. The amount you save is worth it. The freedom you have when you don’t have to made a mortgage payment is incredible.
truth!
This is exactly how we paid off our home mortgage in 10 years from a 15 years mortgage loan before we turn 40 years old over a decade ago. We’ve been debt free since, with no mortgage & no car/CC payment. Not to mention we save a tone of money ($150K) from the interest. The best feeling ever…
Paid my mortgage off way early back in 2014. The last 10 yrs have really been financial freedom to me!
short and concise, well-explained, and the video itself is cleanly structured with an introduction and a description. This is how every informative YT video should be. Great video!
For the first time on CZcams I see a video with reasonable explanation to this problem. Thanks!
Paid mine off 11.5 years early…..best thing i did!
Great video. I combined all of your examples and paid my house off in 9 years and saved close to 200k in interest. Now my mortgage payment goes into maximizing my 401k, Roth IRA and HSA accounts every year instead of going to the bank.
Hey Congratulations!! I was thinking of doing something similar. Bi weekly + consistent extra payments + some lump sum throws. I was wondering - how far can you take it? What if i made weekly payments instead of bi weekly? At 7% it might be better to stop investments for a couple years and just pay the mortgage?
Making a spreadsheet and looking at the numbers is worth its weight in gold. I did this about a year ago when I started off my mortgage and it's seriously impressive how this starts adding up. By overpaying just over £150 each month, I'll reduce my 20 year mortgage down to 15 and save over £7,000 in interest payments. It is kinda soul destroying that the first year doesn't look like it makes much of a difference, but the differences just keep getting bigger and bigger as time rolls on. The sooner you start, the more you'll reap the benefits in the long run.
Duly noted. I just bought a house and planning to do the bi-weekly + $100 (or more) per month.
@@LittleMopeHead
Check the clauses in your mortgage. Some mortgage services do a "funny" but legal thing with payments not equal to the monthly due.
Yep, have had our mortgage for 13months, been overpaying every single month by an average of $1820, I'm seeing the interests saved starting to snowball a bit now, and already shaved 22months off the 15years term. Have had a spreadsheet since day 1 to simulate and know everything ahead of time but it is really satisfying when you mark a month as "actual" and no longer "forecast"
I can remember paying off the mortgage early and owning my home clear of any debt to the bank was an amazing feeling.
It freed up opportunities to pursue new investments , even a portion on higher risk/higher return investments without worrying about the roof over my family's head.
I do weekly payments and every so often I’ll increase my payment by a subtle amount that I won’t notice. It’s so nice seeing that remaining years drop off.
Would weekly payments be more efficient than bi-weekly in terms of paying off the mortgage? I never thought about that.
@@LittleMopeHeadI do mine weekly as well. Mortgage company drafts it right out of my checking, so I never really have to think about making a payment. I get paid bi-weekly and SO gets paid weekly so it works great for our situation.
Man I wish I had tutors like you just to get through Math courses...you made this so clear and easy to follow. Thank you we definitely plan to budget so we can add extra to our current mortgage.
This is by far the BEST explanation of Mortgage rate calculation I have heard so far !!!
Thank you for sharing the spreadsheet with me. This is EXTREMELY helpful.
I got my 30 year mortgage paid off in 8 years, but it was not easy. Even though I was sending them several hundred to several thousand extra each month, the balance seemed to go down oh, so slowly. One month it was $200,000 and the next month it's now $198,000. Still a huge number and almost the same number. And you never have any money, because you are throwing every spare penny at the mortgage. Eventually it was paid off, and that felt good, but it was a somewhat depressing experience while you are going through it. At least it was for me.
I find it depressing that even if I paid off my mortgage, I would still owe over $700 / month and rising for what I consider to be homeowner rent costs (property taxes and homeowner insurance).
What are you doing with your savings now?
@@method341 - S&P500 ETF's, CD's that yield 5%, individual stocks
@@raiden031How much would you have to pay for rent if you didn’t own a home?
Tell the bank that you paid it for the principal amount you borrowed. The bank may put it to the principal and interest or 40 percent principal and 60 percent interest.
We Paid off in 8 years early , what a great feeling !!!!
Wow! Thank you so much for this! My mom always told me to pay an extra house payment toward the principal every year but never explained it like this. I’m adding $250 a month and throwing all extra money at it whenever I can. I can’t thank you enough!
Thank you taking the time to make a very straightforward video without a lot of editorial comments. Very easy to understand and very much 'to the point' re: mortgage paydowns. Appreciate it!
Just subscribed. This information is golden and very well explained with the examples. Thank you!
Good info. I used the Dave Ramsey plan for debts and house. I was debt free house and all in 7 years- but my wife and I worked our asses off to do it!!
Love the Ramsey way.
The "Dave Ramsey" plan is what our grandparents did prior to the 1980's, Dave just repackaged it and main millions of common sense long term practices.
well, not many people are financially secure due to irresponsibility, so clearly there is still a need for it 30 years later. LOL. @@dustinryan9671
Thank you for this! I love excel and being able to see the breakdown really helps. The switch to biweekly was a gem. Will be using ♥️
Thank you for this video. I've known about some of these strategies, but never seen them so clearly demonstrated for easy comparison and understanding.
Everyone kinda knows this, but when you are looking at it visually and actually paying attention- it’s crazy…. Thank you so much for the video! Brilliant job!
You're so welcome!
That's why I built a spreadsheet even before closing on our house/mortgage. That way I could simulate savings and equity properly, it is really motivating to make the effort to overpay
We paid off our house in just under 6 years. Part of that acceleration was a relative passing, but it knocked off 5 years, on top of what we were already throwing at the 15 year loan. Still driving my 20 year old truck with 300k+ miles on it because I'd rather have the money in retirement. The crazy housing market means our home is worth about 3x the price we purchased it at. It feels so good to not be worried about payments.
Congrats! You would have done better in the market.
@@CobaltLobster lol, now I can invest a mortgage payment plus my normal investing and not give money to the banks on interest on the loan. Do some basic math.
@@arigornstrider yeah he’s bit of a negative Nancy, congrats on your success hope it pays off in any way you want it to
@@aron6998 thanks! Already has. House has been paid off for a few years now, and never had any other debt, so the investments are doing their thing over the next few decades.
@@CobaltLobster False, the math works best to pay off the mortgage first.
I love this. I love how you made a spread sheet. im going to binge all of your videos
It was a breath of fresh air to listen to video so well explained. You’ve thought me a lot and some helpful tips going forward. Thank you.
I don't think anyone disputes paying off your mortgage early will save you money, but the real question is what is the opportunity cost? For a low-rate mortgage of 4%, does it make sense to pay it off when the stock market returns on-average 9%? I'd like to see the math comparing that.
If you add the extra $100-$250 to your mortgage payment, you can take what you could pay to the bank and invest it. The market isn't solid, but we know that it could probably give back 8% or more. But split that $250 in half towards your principal mortgage and the other half to invest.
There's a lot of value in getting rid of your mortgage payment. Making an extra few % in the market is nice but freeing up 2k in cash flow is really nice.
4% of Ca.$200k is a bit more than 8-9% of $250. Feels like it would make sense to pay the mortgage down, unless you had tens or hundreds of thousands to invest (at a guaranteed high return?).
@@colin3393 You're incorrect. You're not comparing %4 of $200k vs 8-9% of $250 (although its actually 10% yoy during any 10 year period). You're comparing 4% of $250 vs 8-10% of $250.
@@SuicidelG very true, my mistake, clearly need coffee! In which case... not much of a question!
We live in Canada and paid off our mortgage in August - it took us just under 5 years (we were both in our 30s). 🎉 We saved up our down payment for many years while renting a very cheap apartment and were able to put down about 56%, and then put large lump sums every month or two (sometimes even 2 per month) to help pay it off sooner…and we also paid by-weekly. We’re naturally frugal people, but we also had lots of expenses at the time, including multiple children in daycare, and we also donated between 10-15% of our income each year (we’re Christians and believe in giving) while paying off the house. The interest rates are higher now than when we signed, but if you live well below your means and live as frugally as possible, you can do it!!
Good to see you proclaiming the faith in this chaotic world.
Amazing
Best video on the topic. Thank you very much!!
I have subscribed! Thumbed it up. Very thorough analysis of mortgage. Helped me a lot. Thank you so much Bill.
Now i have to compare the mortgage extra payments with investment after including for taxes on capital gains… my head is going in circles.
Thank you for doing actual calculations and showing the results, it is hard to find such videos
Great video and i appreciate you sharing the excel sheet. Right now i have a 3% mortgage and a 4.5% savings account so I’m not in a hurry.
Love and appreciate the break down, thanks for sharing
This video is awesome! Thank you for helping me understand the amortization of a loan. Excellent!
I’m Canadian and the mortgage system is a little different here (typically a mortgage contract term isn’t longer than 5 years so a thirty year mortgage could potentially have 6 different rates for each of the terms) but the “pay it off faster” approach is good in any country on a loan.
My mortgage broker suggested a thirty year mortgage for me and I requested “if I still qualify could I do 25”?
A 30 year mortgage would only result in $80/month (65USD) smaller payments and, provided my interest rate stays the same and I didn’t make any prepayments and the interest rate stays the same, would cost me about 40k in extra interest! Basically my payments would only go down $80 a month but total loan expenses would increase by over $100/month! I’m glad I qualified for a 25 year mortgage. I intend to pay off my mortgage in less time but, if anything, I’m already setup to save 40k by shortening my term 5 years.
My wife and I pay $5000 a month but our actual monthly mortgage is $3678, so we are paying an additional $1322 towards principal and we started doing that on month one this is a new purchase we’ve only been in this house for 6 months, just can’t wait to owe the bank 0 and will gladly pay my taxes and insurance after that
so what is your rate of return on those extra payments? 0%. Avg stock returns during the last 10 years? 200%
@@geraldbennett7035 incorrect actually but you do what you feel necessary also did I say that I wasn’t also investing?
@@geraldbennett7035why lie, it’s 12%
@@geraldbennett7035your not calculating RISK factor also once they pay off their house they have all these money to invest in stock market. They would have more invested safely then risky. Also this should be looked as safety net of any family then investment.
@@geraldbennett7035the return is the interest rate on the loan.
Love it. I want to learn more. Knowledge is power my friend
Tremendous. Thank you. Gratefully subscribed.
Good advice William! I paid extra with my mortgage and it made a big difference. Now I am mortgage free and for once in my life I actually own the roof over my head👍👍👍👍
The roof is getting old and needs repairs soon
That must be the best feeling in the world 🏠
not always the best in terms of numbers, especially if you have a low loan rate locked in, but the psychological boost is huge@@Lionheart_He-Man
From a pure math perspective (discounting the risk and maybe emotional cost of maintaining a mortgage) there is significant lost opportunity cost resulting from prepaying mortgages. What investment could the extra mortgage payments return is the key question. Because the mortgage interest is a simple interest calculation while investment returns are compounded, one could in theory earn a return equal to or even less than the mortgage interest rate via investing the amount you would have used to prepay and be money ahead. Even if the mortgage is paid off, we are still left with property taxes which are typically baked into the mortgage payment. So, it is essentially impossible to entirely eliminate the payment.
You're right. But I think, in most cases, the extra $100 a month for the average joe would find its way to be spent at a bar/night out rather than in an investment, and so by increasing the mortgage payment (which feels more like a bill than an investment) this advice holds pretty sound for the layman.
I have a 2.625% mortgage rate so I invest all extra income in the market. I would probably do that up until about 6%, then I would probably split it up so that some of it goes towards mortgage and some is invested.
@@raiden031 exactly. If your mortgage rate is lower than a high yield saving account interest rate, paying extra is simply dumb.
Finally… I was looking for this comment. Take emotion out/consider the opportunity costs and you’ll be much better off financially in the long run!
One of the best videos I watched which taught me many things. I had an excel file open, and was practicing and calculating mortgage payments monthly and biweekly while he was teaching us. Thank you so much.
Excellent Will, I have understood it so well. Liked and subscribed 👍🏼👍🏼
My adult children were both stellar students their entire school careers (medical fields). I am now teaching them financial skills like your video explains. It’s amazing how lacking our education system is with skills that are tremendously important.
Amortization schedule. One look and that's all you need to see. I paid off my house in 8 years by doing a few different things. I paid bi-weekly, which chips away at the principal faster and also makes a 13th payment over a year. I paid extra on principal each payment. And I refinanced when it made sense.
Recasting is better solution! Paid of our property within 7yrs…did recasting twice
Thank you for keeping it simple to understand for an average human being. I already putting it to work.
Thanks for sharing William, very educational!
You broke this down in a simple and easy way to understand, thank you. I was already planning on switching to bi weekly payments next year and also paying an extra 100 dollars a month on principle. Once again thank you for confirming my gut feeling that it would be less paid in interest.
I know both is great but which is better; biweekly payments or the additional each month?
Thank you for sharing this information!
I loved the video. Dang! Thanks! Great stuff❤
Excellent video.. good information
Glad you liked it. Thanks!
Excel has a built in function called "PMT" which can calculate the monthly payments:
*PMT(rate, nper, pv, [fv], [type])*
rate = interest rate
nper = number of payments
pv = principal
[fv] = future balance remaining (optional - most of the time, this is zero)
[type] = 0 or 1 value
0 = payments due at the end of the pay period (default)
1 = payments due at the beginning of the period
Thanks!
@@timothyandrewnielsen To make it calculate properly:
1) Take the APR rate and divide it by 12 for the monthly interest rate. Put that into the "rate".
2) Take the number of years and multiply that by 12 for the the number of months to repay the loan. Put that in the "nper".
Its much easier to use the PMT function than the standard formulas like
M=P[i(1+i)^n]/[(1+i)^n)-1].
I cannot say how much I thank you , God Bless you sir , Subscribed
BTW Great Informative Video. I Am Very Happy To Have Stumbled Across This!!!
Thanks for showing the best way to save on interest. I thought about using VB by chunking with a ploc but I'll just making extra payments on the loan and use a cc for normal expenses.
Chunking with PLOC is a nonsensical concept because it takes something simple and adds risk, cost, and complexity
Not in a hurry to buy here as big financial issues are about to be recognized, IMO. Banks are in big trouble and over-leveraged (bail-ins?), debts are out of control; peeps CC's are maxed, and globalists think we should depopulate, eat bugs, and be controlled for their benefit. This should all get resolved very soon, might be very bumpy for a while, but peace and tranquility on the other side.
There's so much f*ckery in markets that they may just close for good. I'll be patient for better clarity over the next 2-3 weeks,At this point, I'm still at a crossroad regarding whether or not to liquidate my $138k stock portfolio. What's the best way to take advantage of this current market?
It's crucial to have a well-thought-out strategy and not make impulsive moves based on short-term market fluctuations. Patience and a long-term perspective are key. You should consider a market expert to guide you.
I agree with you. I started out with investing on my own, but I lost a lot of money. I was able to pull out about $200k after the 2020 crash. I invested the money using an analyst, and in seven months, I raked in almost $673,000
Mind if I ask you to recommend this particular coach you using their service?
There are many financial coaches who excel in their profession, but for the time being, I employ Samuel Peter Descovich because I adore his methods.
You can make research and find out more.
He appears to be well-educated and well-read. I ran a Google search on his name and came across his website;
thank you for sharing.
Great information...Thank you!!
Thank you for explaining. That helps alot!
Mortgage rates are currently at an all time high since 2000(24 years) and based on statistics on inflation, we might see that number skyrocket further, a 30-year fixed rate was only 5% this time 2022, so do I just keep waiting for a housing crash before buying or redirect my focus to the equity market
The stock market is no different, to maintain profit, you need to have some in-depth knowledge on the market. I mostly just buy and hold stocks, but my portfolio has been mostly in the red for quite awhile now. Unfortunately to be able to make good gains, you’ll need to be consistent and restructure your portfolio frequently.
In my opinion, it was much easier investing back in the 80s but it’s a lot trickier now, those making consistent profit in these times are professionals reason I’ve been using an advisor for the past 5 years to consistently build my portfolio in preparations for retirement.
@@mikegarvey17My partner’s been considering going the same route, could you share more info please on the advisor that guides you.
Credits goes to " Gertrude Margaret Quinto " one of the finest portfolio managers in the field. She's widely recognized; you should take a look at her work.
Thanks for the info, i found her website and sent a message hopefully she replies soon.
Best thing to happen to me was my bank charging me a higher interest rate at the last minute because I originally intended on putting 10% down but when I put 20% down to avoid PMI they raised my rate 1%. I paid it down substantially the first 5 years and finally cut the cord just short of 9 years. I’m not sure if I could ever borrow money from a bank again.
I feel like putting down 20% wasnt the best option. Im thinking you couldve gone with the 10% and use the other 10% as a payment afterwards to significantly reduce the interest rate on it
Loved your video. I'm starting this month your strategy.
I’ve been paying an extra $100/month toward principal on a 15 year mortgage at 3.125% from the beginning. The original payoff date was the summer of 2029. I haven’t done the math but it appears the payoff date is now the end of 2027, saving about 1.5 years of monthly payments. I think most people can do this if they aggressively trim down unnecessary spending.
You’ve got a great interest rate, why not invest the $100 per month elsewhere at a higher return than… you’d be pocketing the delta
Yeah I’m with the comment above.. Putting that $100/mo into a S&P 500 fund would generate a better return.
Dude, this is foolish, you should be investing that money not giving it back to the bank! Your loan is only 3.1%! Thats lower than inflation. If anything you should take money out of your home and invest it in something that grows faster.
We are doing the same. We owe $66,000 and I can’t wait until it’s paid off.
You are on the right track Jason, anyone telling you to 'invest in the market' over paying off the mortgage STILL failed to do the mathematical comparison, paying off the mortgage and supressing the the massive interest payments is way more financially intelligent than 'investing in the market' with a 'higher a rate of return'. Most people do not consider the 'sequence of returns' in the market (Ups and Downs, more downs than ups) is one the greatest illusions for wannable investors. I work in the industry.
As a lender for over 35 years, I 100% agree with the idea of paying me off early. Thank you so so much.
I thought that banks and creditors hate it because they make less money overall, though.
That actually depends on the circumstances of each borrower. These days with online banks paying over 4 percent interest, paying off a mortgage at 2 percent might not be the wise move, The wise move might be to leave the money in the bank and earn some net profit.
I have a $200K mortgage at 2 percent. I pay about $333 each month interest. My online bank pays 5 percent. I earn about $833 interest each month on that account. Simple math suggests leaving the cash in the high interest savings account is the wise move.
💩
this is eye opening ! so glad you made this video ! I have so many questions :)
This is a magical solution to a problem that I didn't know could be solved. Thanks a ton!
Subscribed 😊
Hi William. Is there any chance you could share that excel spreadsheet? Great video btw.
I just put a link to the spreadsheet in the video's description. Good suggestion. Thanks
@@TheWilliamLeeShow Thanks!
Back in the day, when I purchased my first home to live-in; that was Miami in the early 1990s, first mortgages with rates of 8 to 9% and 9% to 10% were typical. People will have to accept the possibility that we won't ever return to 3%. If sellers must sell, home prices will have to decline, and lower evaluations will follow. Pretty sure I'm not alone in my chain of thoughts.
In the USA, individuals living in cars due to partial homelessness result from a complex interplay of factors. High housing costs relative to income, stagnant wages, and income inequality drive this issue. Job loss, weak social support, medical expenses, evictions, and lack of affordable housing also contribute, while systemic problems and inadequate policies further perpetuate the phenomenon.
Considering the present situation, diversifying by shifting investments from real estate to financial markets or gold is recommended, despite potential future home price drops. Given prevailing mortgage rates and economic uncertainty, this move is prudent, particularly due to stricter mortgage regulations. Seeking advice from a knowledgeable independent financial advisor is advisable for those seeking guidance.
I agree, that's the more reason I prefer my day to day investment decisions being guided by an advisor, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using my advisor for over 2years+ and I've netted over 2.8million.
I appreciate the implementation of ideas and strategies that result to unmeasurable progress. Being heavily liquid, I'd rather not reinvent the wheel, thus the search for a reputable advisor, mind sharing info of this person guiding you please?
Finding financial advisors like Natalie Noel Burns who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.
Simple, but extremely valuable advise.
Great Vedio with examples . This is something I have been looking for !
Glad it was helpful!
At 7% interest rate, you are better paying off your mortgage than chasing an additional 1-3% in the market. Even there, this is if you have your money in registered Tax Free accounts. If you don't, then just pay your mortgage. The good thing about it is that you can use the mortgage as a credit margin with the money from the overpayment.
At 7% mortgage, REFINANCE ASAP! Better yet, dont buy. Wait until 2025 or 2026.
Excellent Information, Thank you so much.
Incredible. Never have I been so quick to subscribe to a channel. Straight to the point without any of the fluff and affiliate links. Thank you so much for this. These are all attainable goals and you simplified it for me. Thank you again
Thanks! Much appreciated. Glad you liked it.
Why on earth would I pay off my 3% mortgage. When I got 25% or whatever in the s&p this year.. If I pay off the loan I would of lost 22%. You can get almost 6% in cd's and money market now....
Some folks have plenty of money to invest and to pay down the mortage. No mortgage is great and with no mortgage, what you were spending on the mortgage can be invested. A mortgage is the largest investment/expenditure most folks make in their loves. Having it go away is a nice feeling. Maybe someone was only investing $10k a year with a $15k mortage. Once the mortgage is paid off perhaps they invest $25k. Easy to make up for "missing out" on potential market earnings.
@@StlPike2004 You used the word "feeling" in there to describe what it's like to pay it off. Which is a good word because the decision is an emotional and feelings based one. It's not a math based rational. I made 1/3 of my entire existing mortgage in 1 year last year in the market. There is no time in history where over 30 years the S&P doesn't beat a 3% rate.. You are loosing money paying it off and its foolish, its just math.
Dang hillbilly: what stocks do you invest in? I jumped in a few years ago and got beat down in EV stocks (I came in after all the Teslanaires). I am down 90% on Lucid - too beat up to remove my money from the stock. I would love a tip!
@@rexlybrand6688 Forget stocks.. Stick with index funds. VTSAX and chill bro! Im up 9% year to date right now...
@@rexlybrand6688 investing solely in VOO/SPY and QQQ, you'd be way up this year. My portfolios are all at or near all time highs. I don't try to chase the "next thing" or invest in what everyone is gossiping about. Holding ETFs like VOO, QQQ, SCHD, SMH and DGRW or DGRO, you'll do just fine. Maybe pick an international/emrging markets ETF too. I also hold dividend and dividend growth stocks like AAPL, MSFT, MA, V, LOW, HD, TSM, TXN, MCD, SBUX, etc. I also hold stocks like AMZN and GOOG. I think it's important to have a good mix. Aim for a yield o maybe 2-4% and you'll have good growth. Avg yield of 5-8% will provide good income, but you sacrifice growth for that high of yield. Look at the top 10 or top 20 stocks in some of the most popular ETFs and you'll see a lot of overlap. I hold many of those top 1-20 stocks in my taxable accounts. Roth has VOO, QQQ, SCHD, SMH, a few reits, and APPL. You can always convert growth to income. If only we had a time machine and put $10k a piece in GOOG, AAPL, MSFT, TSLA and some others 20 years ago :) Maybe @hillbilly will share some stocks.
Read a book “Payoff your mortgage in 5 years or less - Someone who did it in 3” Strategies were extreme, but effective, After paying off 2 mortgages, the first in 6, the 2nd in 3.5 years, we’ve never looked back. Now sitting in our 3rd House built from the sell of the last house and monies saved NOT paying a mortgage. Great feeling to only pay property taxes in retirement.
Clear and precise.
Really Good Video! Thanks
A question: by your suggestion, we can decrease 30 years mortgage to 20 years. Is there a financial benefit to getting a 20-year mortgage from the beginning rather than making it 20 years manually?
In this market, I realized that if I apply for a 15-year mortgage, my monthly payment increases by only 25% compared to a 30-year mortgage. Can I get exactly the same benefit if I apply for a 30-year mortgage and pay 25% extra each month?
The benefit is a lower interest rate. The drawback is a higher payment and loss of flexibility to change payment amount.
@@samgreene7961 thanks for the answer! Make sense.
That depends on the interest rate. If the interest rate is lower on a 20 year mortgage, the 20 year mortgage might be the wise move. If the interest rate is essentially the same, a longer mortgage may be the wise move.
You may always pay a bit more on a 30 year mortgage to replicate the 20 year payment. Having a lower required monthly payment, on the 30 year mortgage, can be valuable should a financial issue arise.
Personally, I always take the longest loan period possible considering the interest rates. There is nothing to lose as I can always pay more to reduce the actual loan period. On my last vehicle loan, I took a loan for 66 months as it had the same interest rate as a 36 month loan. I paid more each month and paid off the auto loan in about 2 years.
Bottom line, there are many strategies that work.
You just have to find a strategy that aligns with your goals, savings and investment discipline.
Bingo. Well stated and 100 percent correct. Every person is different and every situation is different requiring a different strategy.
What a great idea and explanation.
Thank you for this video and link to your spreadsheet. I've managed to sort out my finances in a way where i'll be mortgage free in around 5 years, cutting down 16 years of potential interest!
My first mortgage in the late 1980s was 13%.
I had that mortgage paid off in 10 years.
Weekly payments and increasing the payment as my wage increased and interest rates fell.
This only has to do with the mortgage payment, not insurance or taxes, which are usually wrapped into the loan. So you can expect the payment to go up a little each year.
Another thing to consider is, If your loan is low, say 4%. You could average a 8% return on the stock market, by owning mutual funds. So making extra payments will depend on the interest rate of the house. Refinancing to a lower interest rate and stretching your payments out to 30 years again, but Not reducing your monthly payments would have the same effect as making extra payments.
Stock market is gambling. Youre saying its better to gamble eh? Maybe, but the stock market has risk.
@@timothyandrewnielsen The stock market is gaining ownership in a company. Earing a share of the profits over the years. If you try trading stocks willy nilly, then yese it is gambling. Mutual funds, like 401ks, Are simply a pre packaged group of stocks for those that do not want to do the research. The S&P500, is a group of the largest stocks in the USA, and since insception has grown on average 12% every year. Some years -20%, some years +40%.
@@timothyandrewnielsenit’s risky in short time but gets safer the longer you invest, so it makes sense to compare it with a 25 years mortgage. But the actual average is closer to 7% and you do need to include taxes and the risk.
So it’s likely not worth it if your mortgage is 5% but if you have 2% interest mortgage then you’ll likely find a better investment even with no risk (for example my bank gives 3% interest on a current account for the first 10k).
@@zlamanit - Things that make sense on paper usually leave out human nature. Investing instead of paying down your mortgage make you more money right up until you convince yourself that you need to sell some of those investments to pay for a trip to Europe or that new BMW that you feel you deserve since you made so much money investing.
Thanks a lot for this great video
I did the same thing with my auto loan, I didn’t know that it works for mortgage too! Thank you so much
Solid explanation! Paid off my house in August - 18 years to the day that I bought it. Felt/feels great!
How? Combo of monthly extra principal payments, large/lump principal payments, 3 refinances and 3 mortgage recasts. All served a purpose!
Congratulations!!!
$525k 2018
$166k Current balance
Recast 2023
Hoping to pay it off by 2026
@@Momofthree03982 Wow....impressive! And the recast? What a powerful tool and I sure wish more people knew about it.
Wealth is built in both bull or bear market and also wealth transfers from the impatient to the patient. One of the best ways to succeed in crypto is by trading your assets with a good strategy....
I want to compliment you, you have said it all. I am a little business owner and I really want to expand my business to the next level by making myself an investor but I really don't know how to go about it..
imagine investing in Btcoin earlier.... You could have been a multi millionaire precently
Assets that can make you rich
*FX
*Btcoin
*Stocks
*Gold
*Real estate
You’re right but a lot of people remain poor due to ignorance
Not because of ignorance, it’s because of the high rate of unprofessionalism in the cypto market
Brilliant Display of the Pay off Mechanics