How to Pay Off Your Mortgage Early - Fastest Method Explained
ฝัง
- เผยแพร่เมื่อ 15 ก.ย. 2024
- Like, Comment, and Share my videos!
🔔 SUBSCRIBE HERE 🔔 bit.ly/BroeSubs...
💯 LET’S CONNECT 💯
📷 Instagram @JakeBroe 👉 / jakebroe
🐦 Twitter @Broe_Jake 👉 / broe_jake
Check out my entire playlist on buying a home here:
• Buying a Home
👇 👇 Watch My Other Videos Here 👇 👇
★ 15 Year vs 30 Year Mortgage - Your Money Explained
• 15 Year vs 30 Year Mor...
★ Why Does Dave Ramsey Hate the VA Loan?
• Why Does Dave Ramsey H...
★ VA Loan Explained - Understanding the Full Process
• VA Loan Explained - Un...
You can support my channel by shopping on Amazon!
Click the link below and then just buy anything you want!
► ► ► amzn.to/2UCE3uT
📷 📷 My TH-cam Equipment 📷 📷
► My Camera 👉 amzn.to/2UZpFwA
► My Wide-Angle Lens 👉 amzn.to/2Qwf3Sq
► My Wireless Microphone 👉 amzn.to/2QBV9W0
► My Shotgun Microphone 👉 amzn.to/36bdLTv
► My Lighting 👉 amzn.to/2F5Ey7V
► My Light Diffusers 👉 amzn.to/2tjF8fG
► My GorillaPod 👉 amzn.to/2Q94aqI
► My Tripod 👉 amzn.to/37kBnVQ
► My SD Card 👉 amzn.to/36dP3Sy
What flag is that? 👉 amzn.to/357sptp
What is your background? 👉 amzn.to/2BCHRp1
================
📚 📚 Books That Changed My Life 📚 📚
📗 How to Win Friends & Influence People 👉 amzn.to/2F3ahGC
📕 Dumbing Us Down 👉 amzn.to/2spodrZ
📘 Quiet - The Power of Introverts 👉 amzn.to/36b2ti3
📙 The Red Queen 👉 amzn.to/2QzNW8W
📔 Rich Dad Poor Dad 👉 amzn.to/3bliFyP
📒 Why Nations Fail 👉 amzn.to/3fWZ3Em
================
www.amortizati...
www.calculator...
www.mortgageca...
www.bankrate.c...
================
#HomeMortgage #PayOffMortgage #PersonalFinance
================
DISCLAIMER:
This video is for entertainment purposes only. I am not in any way acting as an agent or representative of the Department of Defense or United States Federal Government when presenting this information. I am not a legal or financial expert or have any authority to give legal or financial advice. While all the information in this video is believed to be accurate at the time of its recording, realize this channel and its author makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in this video.
ADVERTISER DISCLOSURE:
Jake is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to www.amazon.com. Additionally, other referral links are included and this channel does receive compensation for sending traffic to partner sites. Shopping through our links is an easy way to support the channel and we appreciate and are super grateful for your support!
![[[OFFICIAL MV]] เอิ้นขวัญให้อ้าย- อ๊ะอาย สกุณาพร | ค่ายเพลงเป็นหนึ่ง](http://i.ytimg.com/vi/83x6L3X3qh0/mqdefault.jpg)
Thanks for watching! Check out my entire playlist of videos on buying a home here:
th-cam.com/play/PLscTZuOqKWIz97DBmq5r-4IciwL6uKJfQ.html
the amount of value in this video is astronomical
Haha, I agree Alice! This is more complicated than some people want to make it, but it is the FASTEST method for sure. Cheers!
Absolutely agreed. I was going through depression when I accumulated what felt like insurmountable amounts of debt. I had to put my head down, and grind for almost two years to dig myself out, now I'm debt free and purchased my condo in the city with cash. My mentality and happiness is at all time high. Great video, and great advice. I watch your vids all the time.
Thanks for watching my videos and sharing your story Edgar! Sounds like things are looking up for you. Cheers!
Aaaand, this is how you EARN a subscriber rather than keep on begging to subscribe to your channel every 2 minutes! BRAVO! Thanks for the video. Appreciate all the effort that went into making these videos.
Welcome to the channel Reeewaj! Glad to have you with us!
This is a great plan! Doing this to buy a car currently. Acting like I have a car payment and paying that amount to my brokerage account each month. Watching it grow and looking forward to buying a car in cash.
Awesome advice! I'm still amazed at how fast you pump these videos out with such high-quality information! You're a financial knowledge MACHINE!
Haha, thanks Eugene! My goal is one video every 48 hours, but sometimes I just have to give myself a day off. Two videos a week is still good I tell myself!
It's important to note that this is the "fastest" method (which you did). You will end up paying more interest this way than in paying extra each month, but you will indeed pay it off earlier. The reason, of course, is that you aren't lowering the remaining principal any faster than by doing nothing (because you are doing nothing until you pay it off in a lump sum). Paying extra each month lowers the remaining principal faster, and interest paid each month is a function of remaining principal.
You'll pay more in interest but isn't that number still smaller than the return on your investment so it cancels it out and then some?
@@DavidLee-js8ew no, it isn’t. In his examples he is taking the money out of the brokerage just when he has enough to page the remaining loan balance so nothing left out BUT as @Jonathan Bennett mentioned you are indeed paying more in interest, so even though you pay some years before the house you end up paying more money…hence this doesn’t look like a good strategy for me.
Agree with this comment. Did the math on my situation and although I will pay the loan off 3.5 years quicker if I invest the extra and payoff in a lump sum instead of apply to principal each month it would cost me more in the long run since the majority of early mortgage payments goes to interest. My loan is a 30 year and only about 4 months old. Difference was about $20k more in interest and that was before factoring in the capital gains taxes. To accumulate that extra money may erode the 3.5 year quicker payoff and will also increase the total out of pocket.
@@alainruben that’s true but would you rather spend 10 bucks on a tool that makes it so you only make $100 a day or would you rather spend 20 bucks on a tool that makes it so you can make $200 a day……… Dot yeah you spent more money on the tool, but you’re able to make way more money because you spent more on something that was able to make you more
This video was very informative. I’ve been thinking a lot about this lately…whether to pay off the mortgage with extra payments or invest it and drop a lump sum later. Thank you for the research and calculations. Great video.
Great video as always. Congratulations on almost 20K subscribers!
Thanks beachn! I should hit 20K subs next week! I am so grateful!
Definitely the best recommendation TH-cam has given me to learn. I am new and I want to learn, I don't know a lot of English but it seems great that there is this type of content, thank you for your time that you invest in teaching what you know.
Thanks for watching my videos pablo! Best of luck to you!
Good video! My current investment strategy that resets every year:
1. Max out HSA ($7,100 married) as fast as possible. Should take about 2-3 months hopefully done before April
2. Once HSA is done 50% of take home pay goes to brokerage to invest
House payment is $825 right now and we will be staying here for about 5 more years. Mortgage was 170K and we put $34K down (20%)
In 5 years we would like to cash out refinance but leave 20% in current home and keep it as a rental. We would take the excess funds from the refi plus a portion of our savings as a down payment for our next house (the forever home)
Definitely will push to paying off the forever home ASAP but this one we’re good making the regular full payments.
I like the Finance vids! You’re good at credit cards too but these are helpful
Thanks for sharing your strategy Mark! I would definitely consider putting money in a Roth IRA, but you are still doing well. Cheers!
solid information Capt! this also goes to say ,. use the market as a high interest bank account
Thanks D! I appreciate the comment and support!
Holy cannoli! I love this approach of investing extra payments. Your videos are very helpful, thanks for taking the time!
Awesome! Glad you found my video and appreciate this approach to investing. Cheers!
Great info. I’ve been contemplating this lately as a means to pay off our 4% secondary loan (and our interest rate is so low on the primary loan that we’re not planning on paying that off early).
Glad you found the video Tiffany! Cheers!
Thanks Jake for that financial advice.
Great analysis and it's enlightening. Thank you, Jake!
Thanks for watching RJ! Cheers!
Love it. Straightforward and makes sense.
Thanks Mark! Cheers!
That’s great advice - thanks! We’ve owned out house for about 2 years and pay a little extra towards it every month, but I love the idea of putting that extra $ into one of those ETFs, like VOO & leveraging that at a later date to pay down/off the mortgage.
Great video! I’d never even considered that strategy.
Glad you learned about this method Roderick! Cheers!
Jake, great video for those who plan on holding the house for many years. In our circumstance, we paid off a 30 year mortgage in a little over 6 years. I do not believe this particular strategy would have worked for us, but thank you for thinking outside the box.
How did you go that in 6 year? How many months extra year did you have to pay?
You are one of the only people on TH-cam besides me screaming the investment account approach. I’ll have mine house paid off after 7 years of owning it.
That's awesome T-CATT! Congrats!
Great video! I was about to pay an extra $100 on my mortgage today. Will put in VOO
Thanks poolking! Cheers!
Your out of the box thinking is excellent! Keep the videos coming!
Excellent Video! Great, clear, to the point. Examples and calculators helped greatly. Appreciate your time and effort.
Thanks for watching Helen! Cheers!
Wow, that was just the information I needed as I am looking into refinancing. This makes so much sense. I'll let you know in 20 years if I was able to shave time off my mortgage payment. I don't want to still be paying it when I retire (got a 30 year loan at age 47) This strategy should give me some peace of mind. Thanks!
I hadn’t considered this. I going to play with combining two of my spreadsheets and use a very conservative return to see where I am with the payoff date. Thank you so much.
You are very welcome FF! Playing with the numbers is fun for sure!
WOW you know this when it comes to paying off CCs or other debt but i had not thought on doing this for the mortgage, Just Of course this makes sense
Very informative breakdown! I do wonder what Uncle Dave's reaction to leveraging debt would be 😅
Thanks Asad! Pretty sure Dave is taking me off his Christmas Card mailing list once he sees this video, lol
I wish if you could do these financial videos more.
Quick correction. Please google phrase "What Is the Average Annual Return for the S&P 500?" It is from Investopedia (I am uncertain if I can give a link or not). It states, and I am quoting here: "According to historical records, the average annual return since its inception in 1926 through 2018 is approximately 10%-11%.[cite] The average annual return since adopting 500 stocks into the index in 1957 through 2018 is roughly 8%."
Therefore, more accurate is to state the S&P 500 averages 8%, and not 10%.
Personally, I have a few houses. All rented out. I am using the overflow of rents (after mortgage, insurance, taxes, etc.) to pay off only one other mortgage. Then after than is paid, I pay off mortgage two, mortgage three, etc. Here it snowballs. While the idea of putting cash in the S&P is a nice idea, I personally will just put it direct in my mortgages. My investment money is different. At present however, your way, considering what is going on in the world nowadays (pandemic, mentally unstable president who is attempting a coup, zombies supporting him, etc), I will just pay it off straight. Besides, now it takes just a year to pay off each mortgage in full, so why mess with it.
Hey Jon. Starting the index at 1957 wipes out all the gains made by companies in the post world war 2 boom... more years equals more data, I'd rather use the average since 1926 which gets us closer to 100 years. If we look at just the years since 2010 it is over 13%. The government TSP C Fund (S&P 500 index) goes back to 1988 and averages 10.5%. Lots of way to slice it. I am going with the 100 year average.
What's up Jake, good info.
Thanks PN! Good to hear from you!
Wow thank you so much! This is very educational. Glad I found your channel.
I am glad you found my channel as well! Cheers!
Given the time frame, would a Roth IRA make sense to avoid the taxes if you are old enough when you first buy the house?
Yep! Absolutely! If you are comfortable with your 401k retirement balance, then maxing out your Roth IRA and using that money after the age of 59.5 would be a better option than using a taxable brokerage account. Brilliant idea!
That’s slick!!! Great info I’m sharing the bleep out of this. Btw GO ARMY next week!! ⚔️⚔️⚔️⚔️
Thanks for sharing my content Christian! I appreciate that!
Jake you should make a video about the national debt. Approaching $30T and another stimulus check on the way, the value of the USD is dropping fast.
Haha, I would love to get political, but that is going to have to wait until I get out of the military.
Big fan ! This was the video that made me subscribe.
Awesome! Welcome to the channel Raul! Glad to have you with us!
I love the point that you stressed to be "Disciplined".
Awesome content! So glad I found this channel!
Glad you found the channel Paul! Glad to have you with us! Cheers!
Great Video. Thank you for posting.
Thanks for watching and leaving a nice comment Sonny! Cheers!
I was able to double the principal when I could on my payments every month, and the house went way up in value after fixing it up. When I got the check a few years later after selling it did give me money to reinvest while waiting to buy a new house after this assignment.
That's awesome Geocon! Sound like you made a great amount on the sale!
Excellant advice and great content. You are awesome!
Thanks KB! Cheers!
its an option. However, the market could drop 50% a year before your mortgage is paid off and not recover for years after; defeating the entire purpose. Also, your presumed interest rate of 9.8% seems overly optimistic, its an average with declining interest rates. The market going forward will see increasing interest rated which will counteract stocks going up. You should account for a margin of safety and assume 5%. Then decide if the years gained is worth the risk of losing 50% in one year. You could rebalance using a target date fund but this will limit your gains, at the trade off of limiting your losses. In the end, its not as simple as you put it. One must understand the risk to reward and evaluate at better parameter presumptions.
Hey Armando! You can believe and do whatever you like. This video is just an idea.
I agree with Armando. HUGE assumption as to forward returns, also HUGE assumption as to future capital gains rates. You might end up owing 30% or more cap gains as taxes by the time you get to that point. Lots of risks, but presented as a "risk free" idea effectively. Personally I do not pay down my main residence mortgage much because I have a 2.25% 30 year loan, so its so cheap its not worth it really, but I surely would be if it were 4% or more. That would be 4% guaranteed return versus high both of equity return and tax rates.
That’s a great idea, thank you
You are very welcome Tom! Cheers!
Another way to look at this. The average mortgage payment is around 1200 dollars a month. If you go into retirement without a mortgage, you're gaining positive cash flow for your mortgage amount without worrying about the stock market, at all. Well, for that portion at least. To each their own. We prefer having a pension, a ROTH 401k, 2 ROTH IRA's, AND a paid off mortgage as we retire.
The one potential factor you did not mention is the likelihood that the long term capital gains tax rate will be increased. With the federal deficit at 3.007 trillion dollars as of 9/30/2020 tax rates ARE going up in the future. The SECURE Act will cover a portion of this deficit by speeding up the income received from inherited qualified accounts (IRAs, 401ks, etc,), but I doubt long term capital gains will be spared. There has been much talk in the past about raising this tax rate to at least 20%, so 15 or more years from now, the rate will probably no longer be at 15% meaning you will need additional time and growth in the account to cover the higher taxes.
I agree, long term capital gains might be going up. Ideally they need to change that 0% bracket to something higher. Then maybe none of the rest of them have to change.
Another great video Jake! This makes sense if we keep with the full 30 yr period, because of the differential interest rate compounded over 30yrs. I wonder would your recommendation change if we sold the house in 5yrs, 10yrs?
Very clear!! Thank you so much!
Thanks for watching Jessie! Cheers!
This broke my brain, but in a good way. Oooh, it “broe-k” my brain...Jake Broe...get it? Okay no more coffee today.
Hahaha, thanks Joe! I think you are doing just fine with your coffee.
Wow really helpful for those looking to buy a house 🏡 ty👍
Thanks for watching tauai! Cheers!
I am torn between buying a home with cash, therefore no debt and great peace of mind, and putting only minimum down payment and use the remaining cash to work on the Stock market returning 7-8% a year.
That was really good information. Best Regards
Thanks Bora! Cheers!
Very nice video. Knowledge is key!
My comment is a bit late, but I think I can add to the "big brain idea" by suggesting putting your money into a robo advisor which performs tax loss harvesting. That way you wouldn't even have to worry about capital gains as much, if at all (in theory).
Another great video Jake! I don't know if I would count on a consistent return rate from the stock market but the basis for this idea is solid. In general, if you can make more money investing than the rate on your debt, why not do it?
Pretty much! People can plug in their own numbers. Anything greater than 3% and this strategy is viable.
A 9.8 percent rate long-term, say 15 plus years is completely doable.
Thank you for the video. Really great way of looking at paying off the mortgage early. Is this strategy as effective for a 15 year mortgage loan?
Hey Charles! It would not since the 15 year requires more money to go to the principle. Check out my 15 vs 30 year video. th-cam.com/video/lZnwu2NwwtQ/w-d-xo.html
This was awesome! Thank you.
Thanks Jeff! Cheers!
I have had 4 Mortgages in my life the first 3 were at 7.5 -8.5% I worked hard to pay them off early. Now I have a mortgage at 1.89% Why would I want to pay it off early???
You don't. Pay it off as slowly as possible. Contribute to your retirement bucket ladder instead. Max 401k, roth, hsa, mega back door, etc etc etc.
People have this very backwards now. Peace of mind is not a higher house payment for 15 years, having less retirement, less tax breaks, less disposable income. In case of emergency you have to break into equity because you're strapped...
Peace of mind is taking care of your future, actually having more money, paying less overall on the house, not needing to tap equity in case of emergency...
If your interest rate is around 3%, invest instead. Pay it off as slowly as possible.
Great video! Would be cool to have an update when interest rates are way above 3%. Does the strategy still make sense when your mortgage interest is above 6%? Also, thank you for donating your birthday to Ukraine and your support in general!
Damn... mind blown. This is why I enjoy watching YT vids
Thanks for watching! Cheers Billy!
Wow you are so smart!
So based on your projection, putting $100 more a month onto your principle would save you $19,000 and 3 years on the mortgage. The other option would be to invest the the $100 and in 26 years you will have $144,000 I think you said. The question is what would you have paid in interest to the bank for your mortgage in those 26 years on a $300,000 house, $155,000? How is that better?
What ur saying is great, and it works. However I think most ppl dont over wont do it because they may think it's complicated.
Yep! Just paying down the mortgage faster is easier for people to understand and plan for. But I am just the kind of guy who likes to optimize my money for the best results!
Great video. I have to wonder though how mortgage tax deductions could play into whether this is the best thing to do.
Interesting idea! I'd have to run the math.
Thanks, Jake, for this video. What do you think of opening a Schwab intelligent portfolio just for setting aside extra cash for paying off the mortgage? Can you think of any downside of it?
Wheres a "really like" button when you need one?
Haha, TH-cam is going to have to make one! Thanks Shijo!
Jake THE MEN😎
Thanks RG! Cheers!
Great video!
Thanks Michael! Cheers!
If you go to a 15 year loan, you usually get a better interest rate than a 30 year year loan. That is what I did
Jake, I’d like to bounce an idea off of ya...What if by about year 16 or so, the earned interest on the brokerage account is used to pay the annual mortgage payments. That way at the end of the term, you’ll still have about $150k or so at the end of the mortgage rather than zeroing it to zero the mortgage’ s balance. Thoughts???
Jake what about cash out refinancing at some point and putting that freed up cash into the investment account? Would love to see the math on that!
Brilliant stuff. Thanks.
You are welcome aSlimtube! Cheers!
I enjoyed this video greatly.
Thank you very much Jake. I have been watching a ton of youtube tutorials on investing and growing your wealth. I can say with quite certainty that your channel is one among the best if not the best, the way you explain little things in detail is what makes your videos stand out. Liked, subscribed and looking forward to more from you.
Edit: For once i would like to thank youtube for recommending a correct video.
Thank you so much Tenzin! It is great to have you with the channel. I like to keep it simple and informative around here. If I learn something useful or interesting, I just like getting the information out there. I'm not trying to sell anyone anything, lol. Happy New Years!
I shudder a little at the word. Mortgage essentially means “pledge till death.” The English word mortgage is derived from the Old French : mort, meaning dead (from Vulgar Latin *mortus ) + gage, pledge, of Germanic origin
I prefer the idea of using my equity to buy positive geared investment properties, that pay my mortgage off faster. Once that is done, the tenants can finish paying off the investment properties and I'll either live off the rental income or cash in some real estate to supplement my retirement fund. Do you talk about this method in any other videos.
Hey Jannelle! No, I don't have any videos on property investing yet, but I will soon. Definitely pro and con arguments for each idea! Cheers!
What if you had the properties during a 1.5 year pandemic and there was an eviction moratorium and you didn't have tenants that paid a single dime for a year and a half?
@@reversiontothemean6129 That's terrible. It makes my stomach turn thinking about it, for the landlords unlucky enough to have crap tenants like that.
Even in normal years managing a rental can be a pain in the neck if you are unlucky
What if you take your example and pay just 10% and invest the $30,000 while paying the PMI? What would the following three scenarios look like? 10% down, $30,000, some PMI payments, no contribution vs. 10% down, $30,000 and $100 monthly contribution vs. $60,000 down and $100 monthly contribution.
Awesome
Cheers J B!
Why Roth if i live in a high income tax state if I will move to a no income tax state when I retire?
Excellent content. I just called my mortgage company to stop the extra $200 I added for principal. I'll be investing it to stocks/etf. Stocks/etf moves a lot faster than Roth. Thank you Jake
You are very welcome Floreden! Cheers!
Hi Jake, what are some financial benefits of paying off a mortgage early other than peace-of-mind and the potential for a new mortgage? In one of your examples, you considered a 30 year loan with 3% APR, and contributing $100/month into a taxable brokerage account at 9.8%. In this example, you have enough to pay off the remaining loan after 23 years (the calculator I'm using says $93,763.76 instead of $102,009, I'm not sure why but I'll go with mine for the example since its what I have). However, if you instead continued investing just the $100/month and see the loan through for the remaining 7 years, if my math is correct, you would have $191,721, which, after accounting for taxes, is $132,362. I can't directly compare this number to yours to show the loss of potential since the calculators didn't match perfectly, but it seems to me that continuing for the remaining 7 years would be the better financial decision. So, to bring the question full circle, what reasons would a person have to cash out the investment and pay off the loan, aside from peace-of-mind?
Hey Austin! I believe there is none. If you just look at the math, it is better to keep your money invested and only pay the minimum on your mortgage. But this isn't how ordinary people think. At some point, people would rather earn/save less and just be debt free. I think you understand!
Great info.
Thanks for the comment! Cheers!
IMO it makes no sense to pay off your mortgage early. If your interest rate is
...four years sooner, plus savings on the interest on the mortgage. Way smart!
Hey Vicki! You left this comment 5 months ago, but I can see it right away now. Thanks again for being a member!
Subscribed!
Awesome! Welcome to the channel ImpeccableMoment! Glad to have you with us!
Bruh... This is a fantastic video. Thanks for posting.
Thanks for the comment and support Michael! I hope more people find this video, lol. I think it's a pretty good idea.
Thanks for this video
You are welcome Juan! Thanks for watching!
What about just do principal only payments?
Not sure I understand what you mean? You always have to be making the minimum payment each month.
So I like this example except you don't explain the cost of the mortgage.
Instead of investing in Index funds, I will do my own trading for weekly income. I sell vertical credit spreads, and Iron Condors, using stock options.Time decay it's my ally instead of killing me. Already up 15% in 3 weeks.
If that works for you! Sounds great! Cheers!
Lol this is what i say. Do Both! pay the debt and invest. so many are debt focused or investment focused. your greatest enemy is time, which you'll never get back.
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.
That is so amazing, I’m trying to get onto the investing ladder at 40. I wish at 55 I will be testifying to similar success..
How can I reach this adviser of yours? because I'm seeking for a more effective investment approach on my savings
Natalie Lynn Fisk 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..
I am on her site doing my due diligence. She seems proficient. I wrote her an email and scheduled a phone call. Thanks for sharing
Have you done a video on Thiel Roth IRA?
Hey Kala! I have not, but I will look in to it!
@@JakeBroe I would like to see your opinion on it since I have seen almost all your videos on roth ira
The Theory sounds good but the problem is is that your still paying amortized interest on your home so you may have made 100k off of 30k investment. But you also paid 150k in home loan interests through the same period so there still is a deficit.
But some of that interest is deductible also so it lowers taxable income
The only issue I see If you want to pay it off under 10 years it's not long enough for growth in the brokage acct.
The time period doesn't matter. If you want to pay it off in under 10 years, it is still percent costing you vs percent earned in the market. The difference is the same.
@@JakeBroe the 9% in short term isn't guarantee specially with everything going on. Then gotta deal with the gains tax. I will try it in my new house and will do extra large lump payments in my older home. Good information. Thanks for the info this is way safer than that velocity banking.
I agree with you. The time period for making extra payments matters. If you're able to pay off in less than 10 years or even less than 5 years, then adding the extra money to the principal makes more sense. Going the investment route only makes sense if the payoff is more than 10 years away since the growth will be closer to historical averages. In the short-term, growth is not guaranteed but reduction of principal (and interest) is guaranteed.
Interesting I should show this video to my sister she went to pay her house off quick I believe her term is 15 years not 30
Might be interesting for her! Cheers Brad!
Hi Jake. Do you recommend a similar strategy with student loans? Federal loans have a fairly small percentage on interest and could would out the same. Only asking since the federal loan interest freeze is due to expire the end of December. Thanks!
Hey Josh! No, I wouldn't recommend this for student loans. Your house is an asset that should be gaining value over time and saving you money by NOT renting. It is a true financial asset and mortgage interest is fixed for decades. Student loans is just debt. Does nothing to help you. I would completely pay those off before getting aggressive about investing in anything other than a 401K matching from your employer (always take that).
Might want to add max out HSA before paying off mortgage
Also a solid idea! Cheers Taylor!
Any good spreadsheets out there for calculating this, so I can check different payoff amounts and where the equilibrium happens?
Firstly, my understanding is that the earlier you start paying extra toward the principle on your loan the less interest you would pay on the long run. Secondly, can I open a second investment account and put the extra payment in there then use the profit to pay more on my mortgage yearly?
I think Jack Bogle & others were predicting much lower rates of return going forward especially for the s&p 500, due to the current CAPE ratio valuations. As long as the after tax return is above the mortgage rate, the strategy still stands though 🤔
Hey Jack! Many major financial experts have been saying for over 50 years (since the 1970s) that the US Economy is going to slow down and no longer average 9.8%.... why if these people have been wrong in their predictions for 50 years straight should we be listening to them now. Why proof can they provide that the American economy is heading for a prolonged slow down? I'm not going to base my financial decisions on people whose predictions have been wrong for the last 50 years.
@@JakeBroe That's certainly fair enough, I've heard the saying of "economists have predicted 9 of the past 5 bear markets"; but the cape ratio is based on research by robert shiller that he successfully used to predict both the past tech bubble & the housing bubble. But ya right that probabilities for likely 10 year rolling returns isn't the same as a 100% accurate crystal ball.