What Paying an Extra $1000/Month Does To Your Mortgage
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- เผยแพร่เมื่อ 29 พ.ย. 2023
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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, having a brokerage advisor for investing is genius! Amidst the financial crisis in 2008, I was really having investing nightmare prior touching base with a advisor. In a nutshell, i've accrued over $2m with the help of my advisor from an initial $350k investment.
@@hunter-bourke21 Amazing! I hope it's okay to inquire if you're still collaborating with the same fiduciary and how I can get in touch with them?
Well, there are a few out there who know what they are doing. I tried a few in the past years, but I’ve been with *Gertrude Margaret Quinto* for the last five years or so, and her returns have been pretty much amazing.
I just googled her 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 caII.
Always happy to come across channels like this, for investors to maximize their compounding power I feel investors should be focusing on under-the-radar stocks, and considering the current rollercoaster nature of the stock market, Because 35% of my $270k portfolio comprises of plummeting stocks which were once revered and i don't know where to go here out of devastation.
Safest approach i feel to tackle it is to diversify investments. By spreading investments across different asset classes, like bonds, real estate, and international stocks, they can reduce the impact of a market meltdown. its important to seek the guidance of an expert.
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.
This is definitely considerable! think you could suggest any professional/advisors i can get on the phone with? I'm in dire need of proper portfolio allocation.
I'm cautious about giving specific recommendations as everyone's situation varies. Consider independent financial advisors like "Melissa Elise Robinson" I've worked with her for 9 years and highly recommend her. Check if she meets your criteria.
Thank you! I entered her full name into my browser, and her website came out on top. I filled her form and i hope she gets back to me soon.
We paid off our 15 year in 10 years with overpayments. We really hit the principal hard while we were both working in the first five years before kids came along. Also, given how you pay more interest at the start of a mortgage, I’m glad we were able to knock it down more then. Now that I’m home full time with our kids, I’m so grateful that we don’t have a mortgage payment anymore.
Nothing beats peace of mind!
This comment made me so happy. That's what we're doing too! Waited to buy until we could put enough down to get an affordable payment and plan to pay it off years early so I can stay home with future kids. Nice to see someone who's done it 😊
We bought a smaller home knowing I'd be home with our 3 & 4 y/o's, and "locked in" our "rent" for the next "30 years". Glad to hear from someone else who got it done BEFORE tiny humans came along!! We're paying extra every month but it'll be incredible to pay off our home in (at least) 15 years instead of a 30!
Putting half of my Salary into my portfolio at the start of each month has always been my approach. My second approach is to hold off on selling for at least five years, but as of late, my portfolio has seen a significant fall with losses of around $65k, Please what can i do?
you need a certified financial planner straight up! personally, I invest in ETF's and also love investing in individual stocks. yes it’s riskier but am comfortable in my financial environment
Agreed, After taking charge of my portfolio in early 2017, i stumbled into losses. Upon realizing that a change was necessary, I consulted a fiduciary advisor in 2020 and since then my $1.2m portfolio has gained 28% annually through restructuring and diversification using dividend equities, ETFs, mutual funds, and REITs.
How do I reach out to a financial advisor, my portfolio has been struggling since 2022 and I’ve been holding on by the skin of my teeth.
"NATALIE NOEL BURNS " maintains an online presence. Just make a simple search for her name online.
I copied her whole name and pasted it into my browser; her website appeared immediately, and her qualifications are excellent; thank you for sharing.
One thing I'd like to add is to always, and I mean always, when possible, pay the most you can at the beginning of these loans. The vast majority of the interest is front loaded, so the more you can pay off in principal in the beginning, the more you'll save! For example, if you have an extra 5K and the means, instead of putting 1K every month towards the principal, placing the whole 5K at once will save you more over the life of the loan.
Great advice 👍🏽
5k where are people working 😢😂
@@Honeycomblife What do you mean? Is that a lot? a little?
@@HaitianHallowmy payment is under 800 😂 Im one of those that bought within my means many years ago. When you wrote 5 k that sounded like a lot to me !!
@@Honeycomblife Oh hahaha got it. That makes sense, it's all relative after all. Good job being smart and living within your means!
Sadly, banks continue to stumble, mortgage rates is on the rise with higher imports and lower exports, yet the FED is to lessen cost. So, where do we grow and safeguard our money now? something will eventually break if they keep raising interests and quantitative tightening.
ideally, you should consider financial planning to get the best results with your money, notwithstanding economy situation
Well agreed, I'm quite lucky exposed to finance at early age, started job at 19, purchased first home at 28, got married shortly afterwards to raise kids early. Going forward, got laid-off at 40 amid covid '19 outbreak, immediately consulted with an advisor in order to stay afloat and after subsequent investments, I'm barely 25% short of $1m ballpark goal as of today.
@@theresahv How can I reach this adviser of yours? because I'm seeking for a more effective investment approach on my savings
@@theresahv Thanks for sharing, I just looked her up on the web and I would say she really has an impressive background in investing. I will write her an e-mail shortly.
@@DavidRiggs-dc7jkSo, pay someone to make bad decisions for you? No thanks.
One thing to mention....refinancing RESETS the amortization table and starts with the max interest/min principal ratio all over again. So you should always run the numbers before you refinance, regardless of potential rate improvement, to see if you'll be slowing down the payoff pace vs a "bad" interest rate you've held for awhile.
Good catch, almost never see this mentioned, and it bugs me.
But wouldn't that higher ratio be for a lower loan amount (home price minus built up cash equity), effectively cancelling out the effect of the higher interest ratio.
Lower rate is still better. Yes, a higher percentage goes to interest at the beginning, but your overall payment is lower. If you were to make extra payments to equal what you were paying on your original loan, you’ll still come out in a better financial position.
When you refinance, you don't necessarily have to reset to the 30-year fixed again. You can ask them to change it to a shorter term (given that you qualify), like a 20, 15, or 10-year fixed. It's a higher payment than a 30-year, but it still might be less or comparable with the lower interest rate to your current payment amount. Plus, a shorter term might also come with an even lower interest rate. It depends on your financial goals to determine what's best for you.
Or just set automatic payments that equal your previous mortgage payments. This allows you to make the same payments you would with a shorter term loan but you have the option to pay less any given month if you needed that bit of cash for some reason. Shorter term just forces undisciplined people to have to make that payment. Unless you get a better rate.
Recently bought a house and I have a 6.75% rate. Just under a year I paid an extra $800. which has saved me over $4,800 off the back of my loan.
That same $800 in the S&P would get you between 8k and 24k, depending on the interest rate you got on average (between 8 and 12% historically). Over a 30 year period, interest compounding annually, with no additional contribution.
Not saying you’re wrong, it’s a safe way to spend your money and decrease your debt. My traditional IRA has about 10% return this year alone… and it’s the smallest investment account I have.
@@nwj03amathematically you might be correct, but what happens if someone loses their job?
I’d take a paid for house, then after that, I’d invest as much as I could.
@@nwj03ano it might, that is a gamble. Paying your house off in 15 years is a guarantee.
@@nwj03abut you would also have to take the 6.75% from the 8-12% you would make on the other side. That would be the true value. So how much more are you really making. A 300k house can end up costing 500k at that interest rate.
@thegift the difference is that if you put $800 to your mortgage, you save $4,800 (over 30 years). If you invest 800, you make $8,000-$24,000 (over 30 years).
So the difference is $3,200-$19,200. Take the same $800, invest it in generic S&P etfs and indicies and you make more in the long run, about 60% more conservatively, about 3.5% as much optimistically.
Again, paying off debt is basically risk free, but it’s financially unwise at that interest rate. In my opinion. Your money, use it how ever you’d like.
I remember when rates were 3%, personal finance folks were suggesting to put all your extra money into investments because you could earn more than you’d pay in interest… now that the interest rates are close to historical stock market returns it’s interesting to see how we do the math now. Thanks for the video!!
Yep got lucky to have 2.9% mortgage…. It’s smarter to invest than pay off my mortgage but if I purchased today I would focus on paying off my mortgage
Yeah people get stuck on the interest rate and ignore the principal balance. Great marketing
Wife and I are making double plus mortgage payments and have been able to reduce the principle by 80K in the last 15 months. May not make sense numbers wise, but its a great feeling seeing the debt number decrease substantially. Still investing for retirement plus government defined pension plans.
Dam my house was 90k in 2015 lol yall could of payed mine off lol but good job better rhan throwing your money away on a overpriced rental apt
As December approaches, the home I purchased in 2023 has appreciated by $60,000 since my acquisition. However, the downside is the diminishing value of the dollar. I am currently contemplating strategies to reinvest $300,000 in the real estate market.
portfolio diversification is very advisable in the investment plane , well i think you need to get a financial expert to assist you with the best financial goal.
Exactly , a lot of people neglect the need for a FA , i've been in the Housing market for years , i didnt see need to diversify, but since i got portfolio manager , i make $100k every quarter for the pass 5 years by diversifying in different financial market
@@Andreallln as well i have been on the housing market for couple of years , i have the urge to diversify , but i don't know how to go about it , as well i don't want more financial erros..
There are many financial coaches who excel in their profession, but for the time being, I employ Monica Amanda McClure because I adore her methods. You can make research and find out more.
Thank you for this tip. it was easy to find your investment advisor. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her résumé
Compound interest IS the 8th wonder of the world. It goes both ways- earning it and saving it. Thank you for this video👍
I loove how you break everything down so easily! Thank you for providing these!!
I refinanced my mortgage a couple years ago from 4% to 2.25%. All the money I saved on my mortgage payment I put towards the principal
The way i did it was simple. Every day I packed a lunch and I did not buy fast food I paid 15 dollars into the. principal. Every day and I'm now mortgage free. People dont take into account how much money they spend on fast food nonsense.
Great video.. your information gave me a lot of insight when looking and buying my first home.
You’ll be surprised how many people don’t understand how interest works on a mortgage. I once heard someone say “if you buy a home for 200k and interest is 10% you’ll pay 20k in interest “ 😂
@ModernGamesSuck yes I’m trying to promote that mortgages the way they are should be illegal it’s predatory lending
@ModernGamesSuck If it wasn't called APR(Annual Percentage Rage), Annual being the keyword here, I would understand your confusion. but just calling something a scam because you don't know how it works is plain dumb
@@Krazilok no. its defuntly a scam and banks and people with power and money being able to strong arm the average person into garbage deals.
Nobody is getting scammed at 7.5%. That's a pretty typical rate in the history of rates. Now home affordability does suck, but that's a different issue.
I'm going to have to start renting out my bhole to help pay the mortgage interest
What's the going rate these days?
I appreciate all thw hard work into making these video's. They have been so helpful for my family and i on learning all the deatiks of home ownership.
Paid our first mortgage payment a few days ago....only a few percent went towards the principal. I was so pissed I made the planned extra payment early just to see the number go down lol
We plan to pay it off in just a few years, but it's insane to see how much interest we'd pay if we kept to the 30yr schedule
Other points of distinction that I’d recommend are:
What the difference is when you put 20% down and avoid PMI.
Starting with a 15 year versus a 30 year mortgage. The numbers are vastly different when you do both scenarios.
It’s the road less traveled but it’s a great goal to attain. My husband and I did this in SoCal when we bought our house: 20% down (took us patience to save up while our peers bought right away) and doing a 15 year mortgage.
People forget that they can change the interest rate but never what they paid for the house.
I've been doing this for the last 10 years. Only 5 years left BB.
Such a valuable video, thank you!!
I’m not kidding when I say, I bought a home for that same price in your example ON THE DAY YOU RELEASED THIS VIDEO. thanks!
Love your video ❤
I will never cease to be amazed at how we have normalized interest and the payment of it. It’s criminal in the purest sense of the word.
Our dream: We are downsizing this year. Taking the equity of the sale after paying off the mortgage, which will be approx. 275K accounting for a possible 20k drop at what our current analysis home price. Then moving out of a popular city 2 hours away for a 300k-400k home, with 5 year left of a working wage. We are giving up our 3%
Recently my wife and I just sold two real estate properties for a total sum of $875k. We plan to purchase a new house next year, the cash is just sitting in our joint savings account. What do you recommend we do? I will appreciate any suggestions.
Certain stocks and commodities are a good hedge against inflation, however you need to know what the heck you're doing or better still, seek help from a money coach/invt-advisor
Concurred. was way easier for me to navigate the markets not until 2020 stock market crash, I had to source for a portfolio-coach to revamp my entire portfolio and hedge against inflation. Concisely, I've pulled off around $850k after subsequent investments, since using a coach two years and counting..
this is huge! can you be kind enough with info on the coach that guides you please? I'm in dire need of one as I approach retirement
0:03 MONICA MARY STRIGLE, advanced lady in hre 40s advanced with tech and has a contemporary approach to the markets as I am an I.T person myself and professional at that, I vouch for her services. reserach if you care for supervision.
My advice - buy Multi-Family in your area and collect rent
You taught me some new stuff 💯
Mortgage rates are currently at an all time high since 2000(23 years) and based on statistics on inflation, we might see that number skyrocket further, a 30-year fixed rate was only 5% this time last year, 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.
True, 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 60s 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.
my partner’s been considering going the same route, could you share more info please on the advisor that guides you.
In fact, I'm not sure whether I'm permitted to say this, but I'd suggest searching for Vivian Carol Gioia as she gained a lot of attention in 2020. She is both my coach and the manager of my portfolio.
I appreciate you making this video! It's the same perspective I have. The more I pay now, the less interest I will pay over the lifetime of the loan. If I make no extra payments, at my interest rate I will literally be paying for this house 2x over. LOL.
Still a much better deal than paying $100 more per month for rent in the city I was living in before...
I'm sure the rent for that apt will continue to go up as well.
Great video!
So you’re saying have more money to pay off the house faster… who has an extra $1000 per month?
Great content Javier,I’m going to watch it several times,we planning to buy a house at the 4 months of 2024,planing to hold to it for the next 10 years until I retire in Peru.
thank you brother
Hard to beat 7% return tax free. If you got screwed into a 7% loan, paying off a home has never been more valuable.
If my interest rate is high I’ll take the guaranteed savings over what a mutual fund might do
When it comes to living we are screwed either way! If you stay in apartments it’s over priced and it goes up every renewal and you will never own it .., get a house you pay 3 times as much because interest rates smh .. in my opinion just get the house because at least you can pass it down and your kids can live rent free
Recast can make a change on the monthly payment too🏡
This help breakdown how the mortgage loan works!
I've had to remortgage twice. Credit cards. My husband loved them.
Always enjoy your videos Javier. Keep it up bro
The total mortgage payment, contains principal, interest, homeowners insurance, and property taxes.
9:04 I would never consider whether or not I was ‘pulling one over’ on a bank. If they saw it that way then paying the principal in advance wouldn’t be possible
Step 1: Don't take out a 30 year mortgage, especially for a house that's significantly above your pay threshold.
Step 2: Do take out a 15 year mortgage, within reason for what you could respectively buy with your current pay threshold.
Step 3: Bask in the glory of realizing that you have your house paid off before you die, rather than after.
you're doing the lord's work with these videos, thank you brother. Keep up the good work and let the masses know whats really going on with home ownership!
What if you need to buy a house right now. Can you refinance later for a lower interest rate
I'm currently doing biweekly and an additional $425 a month. Someone recently told me to look into doing weekly to help a little bit more compared to bi-weekly. What's your thoughts on that? Thanks.
Why are you guys so eager to give the bank your money as fast as possible?
"I'll have less money now (certain) so that I'll have more money in the (possible) future."
It doesn't make sense to me, sounds like advice the bank would give.
interesting calculation!
Of course, not everyone can just pay $1000 more. But when I think about stay at home wifes who perhaps have time to take on a small part-time job and think that $1,000 is not necessary, then it would definitely be an incentive to add the interest they save to it. the hourly wage would be extremely high!
Hey have you heard of velocity banking? You can pay your house in 5 years i started doing it i hope you can do a video on it
Great Video. I had a question in regards to if it's even worth buying a home. So If I buy a $400k house at 7.5% interest and don't make additional principal payments, then after 30 years, i'll have paid over $1 million. So if that same house is worth double ($800k) after 30 years and I sell, then I would realize a $200k loss. This goes against the mass messaging of Real Estate is the way to make money and increase wealth right? And it's because of the extremely high interest charges over the 30 years.
Also worth noting is all the savings come off the back of the loan. So if you want the savings for something like your kids' college funds, this might not work for that. Plus inflation is likely to continue to some degree, so on a 30 year fixed your last payment will be a much smaller percentage of income than your first payment.
With investing while still having low-interest debt, the general rule is to pay down the debt if it's above 7%, since that's the average over the long term that you can expect a return (adjusted for inflation).
Personally I think you should be minimally investing regardless because this generation probably won't want to touch their home equity in retirement like boomers do, so will need more funds invested. Plus, we're less likely to have pensions.
Ive also heard to pay a big lumpsum after your down payment but within the first 90 days of purchase.. whats the truth to that.
Javier, have you ever had experience with a buyer that had no credit score, or had to go through manual underwriting? I’ve heard it’s possible (Dave Ramsey of course promotes it) but I don’t know of anyone who has actually done it. I’ll be 25 in January, single income, and I don’t have a credit score but I’ve got my 20% saved, looking to buy sometime in 2025. Could I even qualify with only 1-1.5 year of credit history or do I go for the no-credit route?
I get what you're saying, but wouldn't it be more beneficial to
make baked mac and cheese?
Interesting. Can you make a comparison using a 15 yr mortgage?
How about if you can't even afford to buy a small 1 bedroom apartment even when you're working full time and having a college degree? I can't even imagine having an extra 1k a month.
Javier: My CU does not have the option, on their website, to place an additional amount towards the principal. I just has the scheduled payment amount section. If I chose to send an additional $1000 per month, how would I know that it's not going directly towards the interest?
One thing I love about a mortgage I have in the Dominican Republic is that with each payment to your principal, you can elect to either shorten your mortgage payoff date or reduce your monthly payment EVERY TIME you pay towards your principal. I don’t know how they do it, but I wish it was the same in the US. Eliminates the need to refinance if you want to lower your mortgage payment by owing less every time you add to your principal.
That's amazing. I'm Dominican. I didn't know that. Nice to know. Thank you!
💯🔥
bought a house for 400k and interest rate is 2.9 is it worth pay extra?thanks javier
Javier, I bought in 2021 and would like to remove PMI from my loan. Do I simply just get another appraisal from lender to remove. Seems about the right time since homes around me are selling way above what I paid for mine.
On the same boat. Called my lender today and paid a fee for PMI cancellation and they are choosing an appraiser that will call me to schedule the appraisal.
Would be cool to see a comparison between a biweekly payment vs. additional principal payment. What are your thoughts between the two
You can easily do this lol. It's not like it changes anything that much; You decrease one of the buckets, but the other remains untouched.
And this is where my argument would always stand pretty much solid:
If you're wiling to pay more money every month, why on Earth did you choose a 30-year mortgage, when a 15-year mortgage provides significantly less principle interest, usually isn't talked about, and typically is going to provide you more money when it's time to resell.
Remember you get your interest rate back on taxes, so dont pay off your house what you got than refinancing and buying other properties is what you need to do keep the debt it will help you as well
I'd rather buy a house that's cheap and own it in a year
what website is that?
Aus 1mil house + so payment around 6-7k a month for 30 yrs
Any one know which website he’s using to calculate the additional principle payment ?
Bankrate amortization calculator
What you forgot to include is a 20% down payment. So the loan amount would be $320k (not $400k).
using time invariant dollars is very misleading. the real question is what are the options: assumes you have the money. What other options do you have to generate investment return? At 7.5% mortgage interest, this might be a good idea. back when rates were 3%, there we good alternatives. Additional considerations are: how stable/reliable is your income, and what is the long-term rate of house value increase? be sure to consider variations for the size of the house.
Suppose you save your extra income, buy a second house for rental some years later. the rent pay the interest, taxes and ins + initially, though you are somewhat cash flow negative due to payment of principle. Over years, the rent rate increases until you are cash flow positive.
consider all options, weigh risk
Going with a 15 year loan instead of a 30 year makes a world of difference
Another strategy is to get the 30 and make 15 yr amount payments so that if your income drops for whatever reason, you still have a lower minimum
@@DoubleOhSilverexactly what I was gonna say.
The only down side to that is you end up taking a little more on the interest rate.
So the interest is actually 100% or more
My first mortgage was 7.50%. I took the $150k of proceeds into a $420k 2nd house at 4.something percent. Refinanced down to 3.5% and sitting on a $2,100 on a $900,000 house with 4,300 sq feet. A 2 bedroom apt rents for almost that amount. I've got 5 bedrooms.
Real estate is your best way to create wealth. Don't overthink it. I've seen interest rates above 15% in my lifetime. Rates drop and you move to refinance.
Do I feel our mortgage system is pro-lender? Yea, staying out of the game won't work for you either.
Don't overthink things. Pay extra if you can. You probably won't stay in your first house anyways.
I pay 4000 a month for a 3 bed 1 bad house in morgage today whete am I going to get 1000 more each month
What is a better plan, pay extra every month, one large extra payment once a year, or pay extra twice a month. Thanks and love youe videos
The better plan would be to not take out a 30-year mortgage to pay insane principle interest, when you can just take out a 15-year mortgage and pay significantly less in interest to begin with.
I really hate this overuse of scam. It is not. The paynents and rates are clearly disclosed to you before signing. This higher rate environment sucks compared to the people who got low 2s or 3% rates. But it is not a scam.
7.5% interest rate is already adding that extra thousand.
That person can do 1000 extra a month at 7.5 and 5-10 years later refinance in to 5.5 interest and keep paying 1000 extra to monthly payment.🤔
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 investments.
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Same here, a Transformation of £4000 to £15,400 in just 2 weeks, he's really the best
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Bleep a house!
After paying $1000 more per month for so many years and throw in a recast evey few years. How much more savings would that make or is recasting a bad idea if always paying more than the minimum?
Can't answer your whole question however, you are typically only allowed to recast once in the life of your loan.
but don't house loans always have it in writing that there's either an extra cost for paying more per month or doing an additional payment... or they don't allow it? I know this happens so if you can't do it or if it costs even more to do so, aren't you basically stuck with no option?
Most loans have no ppp charge
Very rarely, but yes, you should read the fine print.
Question, is it better to make an extra payment monthly or one big extra payment annually? What saves me more money over time?
If you have a big lump sum of money now, paying now is better. If you have to save up to make a big lump sum, it's better to pay it monthly. Knocking down principle earlier is better. If you have a low interest rate (like less than 4%) it could be better to invest it or put money in high yield savings at 5+% rather than attack the mortgage.
@justwait9822 I was thinking to save 90k in 3 years to then turn around and do a lump sum and recast my mortgage at 6.5%
Would it make sense to pay monthly or yearly in my case? Editing to add: I am concerned about a high monthly payment as our property taxes just went up 30% in a year (bought an existing house)
The overall goal is to pay off my 315k loan in 7 years
Can someone enlighten me - How does the extra payment towards principal executed in reality ? Do I have to commit to a $1000 for example for a specific period ? Or do I have the option to change the amount month to month as per my convenience ?
Any extra helps
The amount can vary per month. You have to specify that the extra you pay is towards principal..
Let the lender know each time. No time/period commitment is needed
I never hear about how to balance making extra payments with dealing with job insecurity. It is fine making extra principal payments, if you are covered for a job break.
This kinda goes without saying. In reality is anyone’s job 100% guaranteed? You don’t hear anyone talking about this because life is lived with inherent risks. This is up to you and you alone whether you save for a possible job loss, or pay the extra money towards debt. 🤷🏻♂️
To add to what the other commenter said, that’s the purpose of having an emergency fund established that can cover up to 6 months of all of your expenses.
@@kayw1771exactly, priorities should be emergency fund first, then extra on the mortgage. Not the other way around.
Javier, does it make sense for people (who have the money to do so) to put in that extra 1k if they plan on living in the house long term or vice versa? Like.. if you plan to move within 5 years, does it still make sense to put in that extra money toward the principle?
No because if you can pay an additional $1k then you can save for a down payment and move without the pressure of selling your home first. I'd rather do that.
If you plan on moving out in 5 yrs is like saying would it make sense if I wear my socks inside out while making my mortgage. This is not what the video is about dude. But if you must know yes it still makes sense because you will have more equity when you sell at 5 yrs and yes even if you selll with your sock inside out
Yes it does. You reduce your interest payment over the 5 years and your get the extra 1k in form of equity when you sell.
Of course it does! Do you want to diminish the 7.5% interest over 5 years or leave that extra $1K a month in a savings earning you 0.1% or whatever savings accounts get you. Like Dave Ramsey says you know the exact rate of return when you're paying down debt.
@@jacobstrouble6631 the fact that this reply has more likes than the other two tells me people have no idea about the real estate market or financials at all.
I'd prefer to spend the extra on DIY improvements to the home that will raise the value of the property, give me a nicer house to live in, and grow my skills along the way.
I’ve always wondered how much making improvements to your home really increases the value. Also, if you don’t plan on selling your home, paying it off sooner could be advantageous
@@Jsmooth1174 About as much as the cost of the improvement :D Unless you do it yourself that is. At that point your labor is what gives you increased value.
don't ever buy a house in the big metropolitan areas. It's not worth it.
Is there any difference in the amount of interest paid if you get a 15 year versus a 30 year where you pay extra?
You pay less interest over time
Generally, a 15 year loan has a lower interest rate than a 30 year. So you'll be paying less in interest just with that.
It's not a huge percentage difference (i.e. 7.054 vs 6.960 on a quick google search), but adds up...
The downside being you don't have the flexibility if you "need to not make that extra payment" a time or two...
A 15 means that is what you are paying...
(That is what I did, as I didn't trust myself to just put in the extra per month. ;-)
yes, you pay more interest with the 30 year extra pay (assuming you pay that one off in 15 years). You are essentially paying slightly more interest for the flexibility of a 30 year incase you fall on hard times at some point.
@desiv1170 I was the opposite, I needed the wiggleroom to feel like I didn't always need to do extra payments EVERY month. So far it has been I think a bit over 2 years and I've only skipped 1 month to help fill up my roth ira before the end of the year.
How about this, rather than paying that extra 1k a month directly into the mortgage, that if you invest 1k a month for 10 or so years, then take that money, that potentially grew by 5-10% each year and then just pay a lump sum into the principle of the mortgage?
If your going to do this. you might as well have gotten a 15 year mortgage.
If you get a 15 year mortgage you're locked into that payment. With the 30 year if you need to reduce back to only paying what is required you have the ability to without any penalty
@@crashflagons Correct, and you pay more for that flexibility. If you are worried about flexibility, you would be better off investing your excess into an index.
I disagree. Like what Alex mentioned, with a 30yr you have the flexibility of paying it off earlier IF you have the means. It's just another option. Imagine you started making a substantial amount more at work or had a windfall, that would be a scenario where this would be perfect for.
people still arent willing to pay extra on their mortgage. ridiculous!
Who the heck can afford to pay an extra $1000/mo on these super over inflated homes? If you’re lucky you can maybe find a house that will result in your having a $2000 mortgage. That would most likely be in a not so good area and you’d have to make a lot of concessions. While this is sound advice, it’s simply not realistic for most people in todays economy and most of the people you’re talking to are people who most likely have never owned a home so they don’t have a ton of money in equity from a previous home to make their mortgage less.
Can you do one when you put in 10k to principal every 6 months, so technically 10k twice a year.
I wish, I had 10k to throw at my morage twice a year...
Why would someone save up 10k only to dump it after months of saving? You are hurting yourself not imediately putting that money down in the principle.
@@CrypticCobra Depending on the intrest rate and especially at the beginning of a loan putting extra down save a ton of money on the principal. If you have a 3% rate don't bother. But if you have 7% or more yes pay extra. Maybe not 20k a year or 1k extra a month up something.
@@paytonpeta1336 I agree... but that had nothing to do with what I said.
@@CrypticCobra bonuses come after months , she is not saving
Its just a smarter to put that same 1k into an account with an avg of 6-8% return
Which banks are offering these rates? These days 5% is their max.
@@perucho28 s&p 500
@@perucho28 brokerage accounts... Aka invest it into stocks/index funds as the S&P on average has delivered well above 7%. By the end of your mortgage the variance of the market should equalize resulting in a higher total net worth. Plus the bonus of allot of they net worth being investments you can sell off to live on within your home.
Interest rate is all that matters in this equation. If you can invest at a rate above your mortgage rate, do that. If you can’t invest (consistently) above that rate, pay more on the mortgage.
If it’s even kind of close, I’d pay the mortgage down personally, because that’s debt and a guaranteed rate. The S&P averages a 8-12% return (depending on when you look), so if you assume 8 and your mortgage is 7.2… pay the mortgage.
However, if you assume 12 and your mortgage is 5, invest in index/etf. Paying the mortgage is 100% safer 100% of the time, but a traditional savings account is safer than a 401k.