My wife and I paid off our 30 yr mortgage (360k) in less than 7 years. We saved a large sum until that sum equaled the remaining balance of the loan. I calculated we saved over 125k in interest over the life of the loan. We sacrificed for 7 years to have freedom for the next 30 years plus.
@@Davidmallen429 math is not always the best answer, respectfully. How do you put a value to the peace of mind of not having a mortgage? I didn’t stop investing 15% of my income during the 7 years. Plus I am now investing that mortgage payment and my savings rate went up to 50%.
@@CarlosSoto-re2oj I guess it's all perspective. I wouldn't be able to sleep at night knowing that I was paying down my mortgage, when I could be greatly amplifying my returns in other, far more lucrative investment vehicles. I wouldn't be at peace knowing every day that I was effectively "short-selling" my own retirement, and my kid's inheritance.
@@Davidmallen429 I do agree with you about all being perspective. This is the reason it’s called personal finance because it’s personal. There is not a one size fits all approach, unfortunately. My approach gives me peace and flexibility in my life. I appreciate your thoughtful and kind response. Hopefully this helps other people with the personal finance journey.
@@Davidmallen429logically yea but factor in the market flucates and the interest they have to pay waiting for that investment to blossom. Now their house is paid off and can add more money to invest without a mortgage
I think it's time to make it more appealing for potential buyers. Real estate can be quite the rollercoaster! the stress and uncertainty are getting to me. I think I'll cut rents to attract potential buyers and exit the market, but i'm at crossroads if to allocate the entire $680k liquidity value to my stock portfolio?
"Overall, buyers hold a lot of the cards right now, and sellers are having to give out more concessions to close a deal." All the best, buying on sale is actually one of the best ways to invest in stocks, and advisors are ideally suited for such task
Until the Fed clamps down even further I think we're going to see hysteria due to rampant inflation. If you are in cross roads or need sincere advise on the best moves to take now with financial markets will be best you seek a fin-professional with fiduciary responsibilities who knows about mortgage-backed securities for proper guidance.
My CFA Sonya Lee Mitchell , a renowned figure in her line of work. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market.
I'm actually doing this with my current car. 5 years loan (12k / 2019 - 2024) and just by paying 20 bucks extra a month I will be paying that off by mid 2022.
Lets say your payment is currently applying $400 to the principle; so you go make an extra $400 principle only payment. You just essentially made a double payment saving all the interest that would have been paid in the second payment. This is a huge savings at the beginning of the loan!
Very good video. As a reminder, 1. Ask your lender about buying down points on your mortgage interest rate (a Point cost is about 1% of the loan balance) . The point will save you more than double the cost and it’s deductible that year. 2 INSIST upon a mortgage WITHOUT an early pay off penalty. (early payment penalty’s do exist in some contracts ) 3. divide your mortgage payment by 12 and add that amount into your monthly payment. This will effectively have the same savings as the 15 year & bi weekly mortgage but without the legal pressure of an extra payment 4 in the memo column of your check, write. The date & amount : Nov:2023, xtra principal (and that $ amount). This gives you a written & legal receipt. In the 2 years since you made this video, interest rate have soared up. Just remember, What goes up, MUST come down. 🙏🏽
I apologize for not being clear. When I mention making extra payments it means you are paying towards your Principal. When you pay your mortgage payment, any amount paid over the payment must be allocated towards the Principal OR the escrow balance. You can’t make another payment towards a future payment so it’s not necessary to say “make sure not to make multiple payments”.
When you give an amount over your payment it asks you if it goes towards principal or towards your escrow balance. It usually is always applied towards your principal
Ugh yes I cannot stress this enough. I cannot tell you the amount of times where I’ve seen a loan servicer misapply an extra payment made by the borrower who it trying to make the payment towards principle. We always run into this issue at my work.
@@JavyVidana This would likely depend on how you pay your mortgage and probably what bank it is. For example, if you make auto payments from your bank, might be separate from your mortgage company, they aren't asking you anything, they are just receiving checks, and if there is no clear direction or if it doesn't follow what their way, it could result in issues.
@@fearlessreview You aren't understanding like the NPC that you are. As a society we shouldn't be at this point being charged insane interests for a house. Its not a nice to have but a human necessity to live. We need a different system that is more empathetic like having the money come out of salary or benefits and either increasing or decreasing based on circumstances with zero interest
Great video Javi. People that start paying extra principal payments and see the principal melting away generally get excited to pay more each month. (disclaimer: make sure you have your higher interest debt paid off first, then attack the mortgage debt.)
I've always wondered how interest and extra principal payments work, after reading and reading still couldn't understand. You're the only person who made me understand. Thank you so much! You're amazing.
I've done this about 2 months ago and figured out what to pay off first, credit card, truck payment, mortgage and I was able to figure out how much extra I need to spend on each to pay off the mortgage in 15 years. Now if I stick to the plan is a different story.
I've got around 20k saved up. Will use it for if I need something repaired/replaced, emergency or holidays. I will make sure to save up to that amount again if I took something out of those savings first. I montly pay the mortgage, utilities, other payments like car/gass, groceries, insurances, subscriptions. And everything that's left will go to my mortgage as well. Same with bonuses at work. Straight to my mortgage. I don't owe any money nor do I have other debts except for my mortgage. In my opinion it's a huge debt. I want to pay it off as soon as possible. Give myself about €250 each month to spend on myself> clothes, order food/get snacks, presents for bdays, (won't always use it).
My last house was paid off in 16 years. I paid extra principle every month while saving as much as I could. Once in a while when I was comfortable with my savings total and what I had planned (vacations, major purchases, etc) I'd make a large principle payment in addition. Two months later I had to take early retirement and my income dropped $30k. I was ok because my house cost me $100 a month between insurance and property tax. Now that I'm working again, in a new state, that house is rented and I'm getting over $1000 a month from it. That helped me save up for a good down payment on a house here. I'm planning to live there a couple of years, wait for the housing market to figure out what it's doing, while saving up for a down payment, and buy what I actually want. This house, will make a great rental. I believe in getting the 30 yr loan and pay it off as fast as possible. If you sell early, you get more money back. If you stay in the house, when you pay it off you essentially get a salary increase.
How much was your payoff amount? Like what was the amount you had left when you decided to pay it all off vs how much the bank said you owed for that last payment?
Thanx! I modified your instructions so I could take care of the interest on my "Credit Record, What Stinking Credit Record" "Pick a number from 1 to 40" 24 year old daughter`s late model SUV. Once I have that set up and am able to make those payments I will work on the XTRA payments. She is just starting out and I am in my mid-sixties so I want to help her while I can. Everyone in my family has paid CASH for everything (My late 99yr. old father bought his Honda SUV for cash when we made some nice money in the stock market) My Brazilian wife and I built 3 houses and bought my wife's car for CASH when I moved to Brazil. I just want my daughter to follow in the family footsteps while I am here and be Debt Free. Your Video helped me figure out how to get her started by paying off the car.😎
Awesome video, my friend just made her last mortgage payment, yesterday. I’m so inspired. I think I’m going to start with my husband’s truck then I’ll focus on the house.
I did my escrow when I purchased my home 22 years ago. I just sold my house and will be moving later this year when new home is built. Yes- I do everything I can pay off fast as I can! I plan on doing my own escrow again on the new house. This way, monthly amount is low and same. Granted now I do save the money I would have paid on taxes for school, MUD and county every month in my savings so that I pay it off at the end of the year. However, I rather have it vs the lender! Ha! That is why I also plan to do 15 years since mortgage rate is much lower and to pay off faster that way! I do the same for my car- My car payment is $560 a month for 3 years and I pay $150 every Friday but I eventually pay $600 before due date. Brings down the principal down faster and pay less than loan period. Almost finished now and will finish it before the year is over vs March of next year. Yes Javier- paying off mortgage or car loan quicker if u can!! We can do this folks!! Great info as always.. what happened it got cut off??
That isn't the real number. Look at your loan documents and see loan calculations. Total Interest Percentage (TIP) is over the life of the loan. 2.625% over 360 payments really equals 44.774%. Don't believe me? Check your loan documents.
@@bradleygraves5915Yeah, but the time value of money means that paying off my loan entirely now would actually cost me much more money than just paying 2.75% for the next 27 years. Inflation rate is ideally 3%, so really, I owe a little less every year, and the market averages a return around 10%, so it's much smarter to invest money than to pay off my house early.
Thank you for explaining this so well! When I get a mortgage, I may not be able to make extra payments all the time, but I will make it a goal to do so as much as I can. Now that I understand the benefits, it will make me happy to make an extra mortgage payment rather than waste the money on something “fun” or “frivolous.” In fact, extra payments kind of seem like giving myself “free money” in the future because of the interest that I will save in the long run. I love it! I especially like the idea that I am the one who benefits, not the bank, because they won’t get so much profit off my loan.
Great way to think about it. The 30 year loan really gives you the flexibility incase there is a month you just need a breather. But overall, those banks are making tons of money already, why not keep more of it?
Another method could be to invest the money you would pay towards your house and put it into a brokerage account at a rate higher than your mortgage interest rate, therefore gaining interest faster than you owe. Find the break even point in your mortgage (point where mortgage balance is same as brokerage acct) pull the money out and BAM, pay home off!
Not sure if it is a Canadian thing but I bought a condo two years ago and just recently started looking into the details with the lender (through the ATB website). The first 18 months of paying a mortgage went 100% towards interest with nothing coming off the principal. Now, thankfully, 100% of each mortgage payment is going toward the principal. Currently at a fixed 1.74% fixed rate and rates have now gone up to 6% so I am doing whatever I can to pay as much off before my first renewal in late 2026.
We're basically doing this but without any willpower engaged - we did a 20 year loan instead of 30. So we end up doing an extra $285/mo, which cuts through the principal quickly. Lines up with the "A Tier" you put in this video. The reduced flexibility of cash flow does hurt a little bit, but I think overall it's not a bad set up, and it feels good to have our principal dropping so quickly, like $8400 per year it goes down now.
Great video! I just purchased my first home in NV and will be doubling down of principal payments ASAP. I appreciate your practical advice of striving to make at least three additional payments applied towards principle over the course of the year. Building wealth isn’t just about increasing your income, it’s about controlling where you’re income goes. Paying the interest to the bank ❌ no thanks. Paying my future self, yes please! ✅
If any viewer is interested, I have a video explaining mortgage loans from a mathematical perspective that gives insight in what Javier was talking about and why extra payments make such a huge difference.
A good video with nice Strategy! I saw another video, where you can pay off your house faster with a Heloc or home equity loan also. But, I’m a little skeptical on that right now. It was kind of hard to understand.
Good info. Regarding the principle extra payments. You do need to contact your bank and find out the best way to make an extra principal so it gets applied to your principle without complications. For example, my bank requires the full payment to be made prior to any extra principal payment and they should be paid separately. So if your normal payment is on the 1st, you might make the principle payment (additional) on the 20th following the direction of the bank so they know it is to be paid towards the principal. Will vary between banks but don't assume they know what your intentions are. Then follow up for at least the first few months and randomly later to be sure that is what is happening.
I have a 30 year mortgage. Right now I'm making bi-weekly payments with an extra $250 each pay period. In one year I've paid off 3 years of my 30 year mortgage. My goal is to be paid off in less than 10 years.
My wife and I bought a 100,000$ house at 5 percent our payment is 400 our insurance is 209 our we are paying extra 400 a month in on the loan not on interest
Thank you. I just want to hear the math and how it pays off. 🙏🙏🙏 I bought a house fairly young for my generation but I know if I can pay this off quickly it will pay off in the long run!
It sounds like there is only a fixed-rate mortgage in your country. Here in the Netherlands there is also something called a linear mortgage, whereby you pay the same principal each month. So, with the interest added the monthly payment goes down every month.
I don’t care about the math of investing vs paying off lower interest. I sleep soundly knowing I don’t owe a bank and now I save and invest most of my income. When the market goes down I just add more to my position instead of pulling out money to cover a mortgage because I don’t have a mortgage. When I had to take unpaid leave last year during the pandemic I didn’t break a sweat. I’d be fine with 80k less dollars when I retire when either way I’m on track to retire as a multimillionaire. Sometimes it’s more about emotion more than just logic.
I paid off my home by doing $600 towards principle per month. After doing that I think I made a mistake. My rate was 2.875%. I could have invested 600 a month and earned 9% return. I say 9 because that's what I am earning on my investments. So I missed out on a ton of compounding interest by paying my loan off early. If your rate is low invest the money you will come out ahead in the long run.
In Chris Hogans study of over 10,000 millionaires they first paid off their house instead of investing borrowed money. Look into it. It sounds like it can work but it doesn’t.
@@Mcbeef34 using a compounding interest calculator if I put $600 into investment for 30 years and earned 9% I would have 932k. Granted I ended up paying the home off earlier than 30 years In my case I had a 150k mortgage for 15 years at 2.875. I paid it off in 9 years. I saved 15k in interest. If I put that same $600 in my investments I would have made 100k in 9 years. So that's a loss of 85k I could have made in investing. If I kept doing $600 for 15 years I would have made 230k and paid 15k more interest on the loan. Tell me which has the better outcome? When rates are so low it's not smart paying it off fast when you can be earning more with investments. You also lose all the deductions too. I won't make this mistake again.
@@noppawannitrosesatien9625 Taxes on capital gains are extremely low. I think paying a house off early if you had higher interest rates makes sense. But loans in the 2's and 3's you are crazy to not put the extra money towards investments.
My goal when i get to be a home owner is going to be to add an extra 10% to my monthly payments. Just take that 130-160 dollars a month and try to shred the principle over years
Thanks for all your helpful videos. My partner and I are finally under contract (after 3 months and 12 offers) and we are definitely going to try and pay as much extra that we can! :D
Appreciate the real and honest stuff you post Javier! Hope this nice comment makes up for the fact that I’ve been watching you videos for months now without being subscribed....totally thought I was ooops lol
Hi Javier, thanks for this video. I’ll be buying a house soon but I know I want to have it paid off by my mid 40’s. I plan on retiring early and don’t want any debt by the time I’m 50 so I can just travel and live my life.
I hate that all the interest is basically front-loaded on your loan. It sets people up to fail if something happens and they have to turn around and sell (makes it more likely they would go the route of foreclosure).
It's not really frontloaded. It's because your principal is so high which is how interest works. The reason your interest goes down as time goes on is because your principal is decreasing.
@@ywkhgqo I mean, I get thats how the system works, but having only a few dollars go to your principal balance across your first several payments (if you're only making the minimum) isn't great. A lot of people don't understand that & tie themselves up to houses, even when they don't intend to stay in one place longer than 10 years (I speak from experience). I wish videos like this had been shown in high school.
My last house my trick was weekly payments. I took my monthly, divided by 4 it was like 400 or less, a week i paid 600 and had them put all extra on principal. It knocked it down FAST. The only thing id do differently is once i reached the tipping point refinance what i owed and continue to pay the same to expedite faster. I lived in my home 8 years and sold it i had 3 years ( actually like 2 and 8 months or something) left. So 11 years would have paid it off. If i had refinanced for the owed amount at tipping point and continued payments the same id had owned it in roughly 8
Bro thanks for the advice !!!! I love you’re channel ! Going to pay off my truck sooner now and start looking for some property for me and my parents 😁😁
I’m 18 and wanted to start learning about the whole getting a home thing , u should do a video of the basics . Basically a home buying video for dummies
I'm 25 and I'm closing (buying) my first home in 2 weeks. You'll be ready to buy a house when you have 20% for a down payment and a few thousand dollars extra for closing costs (fees that come with buying a house).
It is possible if you put your mind to it I’m sending income tax stimulus and whatever money I have to principal I stopped buying things that I don’t need Bought my house 2019 started at 220,000 I got it down to 160,000 I’m living on nothing Working as much as I can I’m a truck driver btw
If you're going to follow this advice, most of the advantage of making additional principle payments comes in the first 5-10 years. After that, the benefits wane considerably.
Hey thanks for the content very useful for someone like me that doesn’t know much. Also as a fellow Latino you make me proud when I see you doing your stuff and have subscribed. I have a question on how to proceed. Currently my father is in charge of the mortgage and I saw he has a high int. Rate and we're going to refinance with a lower rate. HOWEVER, my concern is about the appraisal. We plan on fixing the house but aren't sure to do this before the appraisal as we may end up having to pay more for the house. Should we wait to do the home remodeling after the appraisal?
great info i was on biweekly before but was sold to another mortgage company so now I'm just adding a extra payment per year that's all i can afford at the moment, so I'm trying to get it up there maybe when i get a raise ill up it . thank for the advice
Would love to see how inflation rates affect these ways. Are we losing money paying it early or we are still saving money despite not considering inflation
Hello, I apologize if this was adressed or is a dumb remark, but I was told that if you save up 10k or more you can do something called restructure your loan and put that saved money directly all towards your principle thus reducing the interest faster, what is your opinion on this?
Great video. I paid my house in 12 years. Traditionally some decades ago, paying the mortgage in 30 years was paying three times the loan, like to say the loan is $300,000 after 30 years you paid 900,000 for the house. Paying the mortgage in 12 years you ended paying $450,000 to $500,000. You save $400,000 to $450,000 by paying early the mortgage. Now well, you must be a genius in business as being a regular dude with no much knowledge in investment to invest your money in stocks and make $450,000 in 12 years, but still in debt with your mortgage for the next 18 years. At the end of the day, the best investment is to pay the mortgage the sooner the better.
Take a 30 year loan. Treat it like a 15 year in which you take the extra Savings you get and drop it into investments. You'll be able to pay off your entire mortgage way sooner than 15 years since the stock market will return more than 8%.
Thank you. IDGAF about investing, overpaying my mortgage triple payments to pay off in 27 months. Also, my credit Union automatically credits overpay $$ as additional principal payment.
Hello Javier I have a 4 Unit Apartment Building Los Angeles and have a 2 % Interest Loan . I cash flow $6100 extra a month after I pay mortgage. I want to buy a house for myself but everything to expensive . I am self employed. I owe $510,000 on Building . Should I pay it off or buy a house .
I paid principal only payment every month … 500 to 1000 every month and what i getting back from taxes 1000 go to vacation the rest whatever the amount is go to the mortgage
In a scenario where a loan is paid off early with extra payments applied to the principal (inconsistent times), do you know how to calculate the interest rate (not amount) paid after the loan is paid off? For example, if the term of the loan is 60 months with an interest rate of 6%, but someone paid it off in 50 months? This has proven difficult to find the answer to so any help is greatly appreciated.
Great video, but somethingh to realize is that the opportunity cost of this money can be high. For instance, the same amount going towards a 2% interest rate loan could be instead invested in the S&P500 and have gotten a whopping 8% average annualized return. Now, the benefit is that your 2% interest gain is "locked in", whereas you aren't guaranteed to have a positive return on the stock market, but the point still stands. The higher your home loan interest rate, the more beneficial to lock in a guaranteed rate of return.
yeah I have been paying the minimum on my 2.75% mortgage and putting my extra money into index funds. sure I will pay a buttload of interest, but I will have even more money in the stock market. as long as you can wait out any recession it seems best to invest. On top of that if inflation ever happens it's better to have as much money borrowed as possible so you can pay back the same dollar amount with your money that is now worth less.
I understand the math but I’m risk adverse and try to get out of debt as fast as possible. I have a personal home and a rental and when Covid struck and my tenant couldn’t pay for a couple months + I had to take 4 weeks unpaid leave, it was awesome to not have mortgages to worry about at the time. I also had investments and didn’t have to sell any stock while the market was down to stay afloat. I added to my position and could “buy the dip” because I had extra money.
very good info on this channel I 100% subscribed. I wish they taught me this stuff in school its way more important that complex math equations and learning the theory that all humans came from a rock and that everything came from nothing.
All Stores Please Lower the price of all Military and Local for all Brands of House Payment Products and Interest Rates and Accessories and Production Cost Now That's too much $$ The Whole World Now 🙏🙏🙏
Great video outlining how extra payments can heavily impact your time it takes to pay down your mortgage! Question, I’ve gotten mixed signals that because interest rates are so low, I might be better off using that extra money to invest instead of making those extra payments. What are your thoughts on this? In this specific climate where interest rates are so low, should we invest that money somewhere else with bigger return, or should we put it into the extra payments? Thanks for your time !!!
Seeing as the stock market is down 20%~ since you made this comment, the inherent risk of investing the money instead is pretty obvious. Whereas your interest savings with extra payments are guaranteed.
@@InternetUser._ 100% this. Sure a perfect scenario you could’ve made more with the money somewhere else. However if you put the money towards the balance, you are Guaranteed a lower total interest paid assuming you do it as often as possible.
Hi Javier, quick question, if we had more money than the 20% down for a home, what is the best way to pay into the home? Should we pay more into the downpayment?
I've learned sooooo much about purchasing a home for the first time just by tuning in for the inappropriate jokes! 🤣 But seriously, when you make extra payments, do they automatically get applied to the principal, or do you have to call them & tell them you want it applied to the principal only?
My wife and I paid off our 30 yr mortgage (360k) in less than 7 years. We saved a large sum until that sum equaled the remaining balance of the loan. I calculated we saved over 125k in interest over the life of the loan. We sacrificed for 7 years to have freedom for the next 30 years plus.
You saved over 125k in interest, but if you would have invested that same money over 30 years, you would have made A LOT more than 125k.
@@Davidmallen429 math is not always the best answer, respectfully. How do you put a value to the peace of mind of not having a mortgage? I didn’t stop investing 15% of my income during the 7 years. Plus I am now investing that mortgage payment and my savings rate went up to 50%.
@@CarlosSoto-re2oj I guess it's all perspective. I wouldn't be able to sleep at night knowing that I was paying down my mortgage, when I could be greatly amplifying my returns in other, far more lucrative investment vehicles. I wouldn't be at peace knowing every day that I was effectively "short-selling" my own retirement, and my kid's inheritance.
@@Davidmallen429 I do agree with you about all being perspective. This is the reason it’s called personal finance because it’s personal. There is not a one size fits all approach, unfortunately. My approach gives me peace and flexibility in my life. I appreciate your thoughtful and kind response. Hopefully this helps other people with the personal finance journey.
@@Davidmallen429logically yea but factor in the market flucates and the interest they have to pay waiting for that investment to blossom. Now their house is paid off and can add more money to invest without a mortgage
I think it's time to make it more appealing for potential buyers. Real estate can be quite the rollercoaster! the stress and uncertainty are getting to me. I think I'll cut rents to attract potential buyers and exit the market, but i'm at crossroads if to allocate the entire $680k liquidity value to my stock portfolio?
"Overall, buyers hold a lot of the cards right now, and sellers are having to give out more concessions to close a deal." All the best, buying on sale is actually one of the best ways to invest in stocks, and advisors are ideally suited for such task
Until the Fed clamps down even further I think we're going to see hysteria due to rampant inflation. If you are in cross roads or need sincere advise on the best moves to take now with financial markets will be best you seek a fin-professional with fiduciary responsibilities who knows about mortgage-backed securities for proper guidance.
this sounds considerable! think you know any advisors i can get on the phone with? i'm in dire need of proper portfolio allocation
My CFA Sonya Lee Mitchell , a renowned figure in her line of work. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market.
On her page, she appears to be well-educated and well-read. I ran a Google search on her name and came across her website; thank you for sharing.
I did this with my car. 6 year loan paid off in 3 years. Just put my extra tax refunds, bonuses, etc towards it when I could. GLORIOUS.
Probably drives faster too. Congrats!
I'm actually doing this with my current car. 5 years loan (12k / 2019 - 2024) and just by paying 20 bucks extra a month I will be paying that off by mid 2022.
I bought a Nissan kick paid 18k for it one single payment without interest
@@triggerxx9760 You probably overpaid for it if you just told the dealership you was paying cash right away.
@@pablo2097 its a 2020 kick sr Brand new Car off the lot I think I got a good deal
Lets say your payment is currently applying $400 to the principle; so you go make an extra $400 principle only payment. You just essentially made a double payment saving all the interest that would have been paid in the second payment. This is a huge savings at the beginning of the loan!
Very good video. As a reminder, 1. Ask your lender about buying down points on your mortgage interest rate (a Point cost is about 1% of the loan balance) . The point will save you more than double the cost and it’s deductible that year. 2 INSIST upon a mortgage WITHOUT an early pay off penalty. (early payment penalty’s do exist in some contracts ) 3. divide your mortgage payment by 12 and add that amount into your monthly payment. This will effectively have the same savings as the 15 year & bi weekly mortgage but without the legal pressure of an extra payment
4 in the memo column of your check, write. The date & amount :
Nov:2023, xtra principal (and that $ amount). This gives you a written & legal receipt.
In the 2 years since you made this video, interest rate have soared up. Just remember, What goes up, MUST come down. 🙏🏽
I apologize for not being clear. When I mention making extra payments it means you are paying towards your Principal. When you pay your mortgage payment, any amount paid over the payment must be allocated towards the Principal OR the escrow balance. You can’t make another payment towards a future payment so it’s not necessary to say “make sure not to make multiple payments”.
Yes!!
yes please
Got it:
•Sell house 💵
•Buy Doge 🚀 🚀🚀
•Sell Doge 💎🙌
•Buy house cash 💰
Thanks Javi
To the moooooonnn
Yes
Just make sure your extra payment is applied to the principal and not the next month's payment.
When you give an amount over your payment it asks you if it goes towards principal or towards your escrow balance. It usually is always applied towards your principal
Ugh yes I cannot stress this enough. I cannot tell you the amount of times where I’ve seen a loan servicer misapply an extra payment made by the borrower who it trying to make the payment towards principle. We always run into this issue at my work.
Or held in an escrow account for the taxes.
@@JavyVidana This would likely depend on how you pay your mortgage and probably what bank it is. For example, if you make auto payments from your bank, might be separate from your mortgage company, they aren't asking you anything, they are just receiving checks, and if there is no clear direction or if it doesn't follow what their way, it could result in issues.
What is the principal? 😅
Thanks for breaking it down. Rather put extra $250 towards my mortgage than into my 5% HYSA
Paying my 30 year mortgage like a 20. I like the online calculators for playing around with various payoff options.
It’s crazy how much interest we pay for home loans this should be illegal
Who else is going to lend you a quarter million +
@@fearlessreview You aren't understanding like the NPC that you are. As a society we shouldn't be at this point being charged insane interests for a house. Its not a nice to have but a human necessity to live.
We need a different system that is more empathetic like having the money come out of salary or benefits and either increasing or decreasing based on circumstances with zero interest
Great video Javi. People that start paying extra principal payments and see the principal melting away generally get excited to pay more each month. (disclaimer: make sure you have your higher interest debt paid off first, then attack the mortgage debt.)
@@MortgageBrokerTim - whoops 😂 - I just corrected …
@@MattTheMortgageGuy - I deleted my comment.
Neil
I've always wondered how interest and extra principal payments work, after reading and reading still couldn't understand. You're the only person who made me understand. Thank you so much! You're amazing.
Seriously? Google mortgage calculator payoff. Simple stuff
Exactly !!
I've done this about 2 months ago and figured out what to pay off first, credit card, truck payment, mortgage and I was able to figure out how much extra I need to spend on each to pay off the mortgage in 15 years. Now if I stick to the plan is a different story.
I've got around 20k saved up. Will use it for if I need something repaired/replaced, emergency or holidays.
I will make sure to save up to that amount again if I took something out of those savings first.
I montly pay the mortgage, utilities, other payments like car/gass, groceries, insurances, subscriptions.
And everything that's left will go to my mortgage as well.
Same with bonuses at work. Straight to my mortgage.
I don't owe any money nor do I have other debts except for my mortgage. In my opinion it's a huge debt. I want to pay it off as soon as possible.
Give myself about €250 each month to spend on myself> clothes, order food/get snacks, presents for bdays, (won't always use it).
My last house was paid off in 16 years. I paid extra principle every month while saving as much as I could. Once in a while when I was comfortable with my savings total and what I had planned (vacations, major purchases, etc) I'd make a large principle payment in addition. Two months later I had to take early retirement and my income dropped $30k. I was ok because my house cost me $100 a month between insurance and property tax. Now that I'm working again, in a new state, that house is rented and I'm getting over $1000 a month from it. That helped me save up for a good down payment on a house here. I'm planning to live there a couple of years, wait for the housing market to figure out what it's doing, while saving up for a down payment, and buy what I actually want. This house, will make a great rental.
I believe in getting the 30 yr loan and pay it off as fast as possible. If you sell early, you get more money back. If you stay in the house, when you pay it off you essentially get a salary increase.
How much was your payoff amount? Like what was the amount you had left when you decided to pay it all off vs how much the bank said you owed for that last payment?
@@richardsanchez9190 I don't remember. That was 2016, so it's been a while.
I have a solution to the mortgage debt problem if you are interested?
Thanx! I modified your instructions so I could take care of the interest on my "Credit Record, What Stinking Credit Record" "Pick a number from 1 to 40" 24 year old daughter`s late model SUV. Once I have that set up and am able to make those payments I will work on the XTRA payments. She is just starting out and I am in my mid-sixties so I want to help her while I can. Everyone in my family has paid CASH for everything (My late 99yr. old father bought his Honda SUV for cash when we made some nice money in the stock market) My Brazilian wife and I built 3 houses and bought my wife's car for CASH when I moved to Brazil. I just want my daughter to follow in the family footsteps while I am here and be Debt Free. Your Video helped me figure out how to get her started by paying off the car.😎
Awesome video, my friend just made her last mortgage payment, yesterday. I’m so inspired. I think I’m going to start with my husband’s truck then I’ll focus on the house.
fr the best thing for new home buyers. thank you for doing what you do
I did my escrow when I purchased my home 22 years ago. I just sold my house and will be moving later this year when new home is built. Yes- I do everything I can pay off fast as I can! I plan on doing my own escrow again on the new house. This way, monthly amount is low and same. Granted now I do save the money I would have paid on taxes for school, MUD and county every month in my savings so that I pay it off at the end of the year. However, I rather have it vs the lender! Ha! That is why I also plan to do 15 years since mortgage rate is much lower and to pay off faster that way! I do the same for my car- My car payment is $560 a month for 3 years and I pay $150 every Friday but I eventually pay $600 before due date. Brings down the principal down faster and pay less than loan period. Almost finished now and will finish it before the year is over vs March of next year. Yes Javier- paying off mortgage or car loan quicker if u can!! We can do this folks!! Great info as always.. what happened it got cut off??
I was doing this, but I have a 2.75% interest rate, so now I'm just paying the minimum!
That isn't the real number. Look at your loan documents and see loan calculations. Total Interest Percentage (TIP) is over the life of the loan. 2.625% over 360 payments really equals 44.774%. Don't believe me? Check your loan documents.
@@bradleygraves5915Yeah, but the time value of money means that paying off my loan entirely now would actually cost me much more money than just paying 2.75% for the next 27 years.
Inflation rate is ideally 3%, so really, I owe a little less every year, and the market averages a return around 10%, so it's much smarter to invest money than to pay off my house early.
Thank you for explaining this so well! When I get a mortgage, I may not be able to make extra payments all the time, but I will make it a goal to do so as much as I can. Now that I understand the benefits, it will make me happy to make an extra mortgage payment rather than waste the money on something “fun” or “frivolous.” In fact, extra payments kind of seem like giving myself “free money” in the future because of the interest that I will save in the long run. I love it! I especially like the idea that I am the one who benefits, not the bank, because they won’t get so much profit off my loan.
Great way to think about it. The 30 year loan really gives you the flexibility incase there is a month you just need a breather. But overall, those banks are making tons of money already, why not keep more of it?
Another method could be to invest the money you would pay towards your house and put it into a brokerage account at a rate higher than your mortgage interest rate, therefore gaining interest faster than you owe. Find the break even point in your mortgage (point where mortgage balance is same as brokerage acct) pull the money out and BAM, pay home off!
Your videos are very simple, down to earth and point straight to the facts . Love listening to them
Not sure if it is a Canadian thing but I bought a condo two years ago and just recently started looking into the details with the lender (through the ATB website). The first 18 months of paying a mortgage went 100% towards interest with nothing coming off the principal. Now, thankfully, 100% of each mortgage payment is going toward the principal. Currently at a fixed 1.74% fixed rate and rates have now gone up to 6% so I am doing whatever I can to pay as much off before my first renewal in late 2026.
Thank you, for goodness sake someone was able to help me figure out how to calculate the interest rate so easily!!! 😊
We're basically doing this but without any willpower engaged - we did a 20 year loan instead of 30. So we end up doing an extra $285/mo, which cuts through the principal quickly. Lines up with the "A Tier" you put in this video. The reduced flexibility of cash flow does hurt a little bit, but I think overall it's not a bad set up, and it feels good to have our principal dropping so quickly, like $8400 per year it goes down now.
Great video! I just purchased my first home in NV and will be doubling down of principal payments ASAP. I appreciate your practical advice of striving to make at least three additional payments applied towards principle over the course of the year. Building wealth isn’t just about increasing your income, it’s about controlling where you’re income goes. Paying the interest to the bank ❌ no thanks. Paying my future self, yes please! ✅
I have a solution to the mortgage debt problem if you are interested?
If any viewer is interested, I have a video explaining mortgage loans from a mathematical perspective that gives insight in what Javier was talking about and why extra payments make such a huge difference.
A good video with nice Strategy! I saw another video, where you can pay off your house faster with a Heloc or home equity loan also. But, I’m a little skeptical on that right now. It was kind of hard to understand.
Good info. Regarding the principle extra payments. You do need to contact your bank and find out the best way to make an extra principal so it gets applied to your principle without complications. For example, my bank requires the full payment to be made prior to any extra principal payment and they should be paid separately. So if your normal payment is on the 1st, you might make the principle payment (additional) on the 20th following the direction of the bank so they know it is to be paid towards the principal. Will vary between banks but don't assume they know what your intentions are. Then follow up for at least the first few months and randomly later to be sure that is what is happening.
I have a solution to the mortgage debt problem if you are interested?
I have a 30 year mortgage. Right now I'm making bi-weekly payments with an extra $250 each pay period. In one year I've paid off 3 years of my 30 year mortgage. My goal is to be paid off in less than 10 years.
I bought way too high but I promise myself to pay off earlier than 30 years. thanks for sharing
Thank you so much for the super simple and straightforward video. You have no idea how much I appreciate content like this.
My wife and I bought a 100,000$ house at 5 percent our payment is 400 our insurance is 209 our we are paying extra 400 a month in on the loan not on interest
Thank you.
I have a 15 year mortgage since last year and with your ideas I’ll be debt free sooner. Thanks again.
Thank you. I just want to hear the math and how it pays off. 🙏🙏🙏 I bought a house fairly young for my generation but I know if I can pay this off quickly it will pay off in the long run!
It sounds like there is only a fixed-rate mortgage in your country. Here in the Netherlands there is also something called a linear mortgage, whereby you pay the same principal each month. So, with the interest added the monthly payment goes down every month.
I don’t care about the math of investing vs paying off lower interest. I sleep soundly knowing I don’t owe a bank and now I save and invest most of my income. When the market goes down I just add more to my position instead of pulling out money to cover a mortgage because I don’t have a mortgage. When I had to take unpaid leave last year during the pandemic I didn’t break a sweat. I’d be fine with 80k less dollars when I retire when either way I’m on track to retire as a multimillionaire. Sometimes it’s more about emotion more than just logic.
I paid off my home by doing $600 towards principle per month. After doing that I think I made a mistake. My rate was 2.875%. I could have invested 600 a month and earned 9% return. I say 9 because that's what I am earning on my investments. So I missed out on a ton of compounding interest by paying my loan off early. If your rate is low invest the money you will come out ahead in the long run.
Noted, thanks for the comment
In Chris Hogans study of over 10,000 millionaires they first paid off their house instead of investing borrowed money. Look into it. It sounds like it can work but it doesn’t.
@@Mcbeef34 using a compounding interest calculator if I put $600 into investment for 30 years and earned 9% I would have 932k. Granted I ended up paying the home off earlier than 30 years
In my case I had a 150k mortgage for 15 years at 2.875. I paid it off in 9 years. I saved 15k in interest. If I put that same $600 in my investments I would have made 100k in 9 years. So that's a loss of 85k I could have made in investing. If I kept doing $600 for 15 years I would have made 230k and paid 15k more interest on the loan. Tell me which has the better outcome? When rates are so low it's not smart paying it off fast when you can be earning more with investments. You also lose all the deductions too. I won't make this mistake again.
@@myriadcorp that is what I am going to do when I buy a house but don’t you have to pay for tax on your investment earnings?
@@noppawannitrosesatien9625 Taxes on capital gains are extremely low. I think paying a house off early if you had higher interest rates makes sense. But loans in the 2's and 3's you are crazy to not put the extra money towards investments.
My goal when i get to be a home owner is going to be to add an extra 10% to my monthly payments. Just take that 130-160 dollars a month and try to shred the principle over years
That moment when the shame blip was so natural to hear since I just finished watching related content 😂 😂 😂, much more appreciation for ya man!
Thanks for all your helpful videos. My partner and I are finally under contract (after 3 months and 12 offers) and we are definitely going to try and pay as much extra that we can! :D
I have a solution to the mortgage debt problem if you are interested?
Appreciate the real and honest stuff you post Javier! Hope this nice comment makes up for the fact that I’ve been watching you videos for months now without being subscribed....totally thought I was ooops lol
Love the abrupt ending. Great info and appreciate these videos you keep making.
Will you drop the link to that online amortization calculator?
I think I just used bankrate, its like the second link when you google it!
Hi Javier, thanks for this video. I’ll be buying a house soon but I know I want to have it paid off by my mid 40’s. I plan on retiring early and don’t want any debt by the time I’m 50 so I can just travel and live my life.
I have a solution to the mortgage debt problem if you are interested?
Oh my gosh this was the best video ever. You cut to the chase you made the simple to understand and I am now a subscriber to you. Thank you
I hate that all the interest is basically front-loaded on your loan. It sets people up to fail if something happens and they have to turn around and sell (makes it more likely they would go the route of foreclosure).
It's not really frontloaded. It's because your principal is so high which is how interest works. The reason your interest goes down as time goes on is because your principal is decreasing.
@@ywkhgqo I mean, I get thats how the system works, but having only a few dollars go to your principal balance across your first several payments (if you're only making the minimum) isn't great. A lot of people don't understand that & tie themselves up to houses, even when they don't intend to stay in one place longer than 10 years (I speak from experience). I wish videos like this had been shown in high school.
OMG! I watched this video 5x already 😂😂😂
Which one is better ? Pay extra to principal monthly or pay extra once in a year ?
Make sure your loan doesn’t have a penalty for paying off the loan early.
My last house my trick was weekly payments. I took my monthly, divided by 4 it was like 400 or less, a week i paid 600 and had them put all extra on principal. It knocked it down FAST. The only thing id do differently is once i reached the tipping point refinance what i owed and continue to pay the same to expedite faster. I lived in my home 8 years and sold it i had 3 years ( actually like 2 and 8 months or something) left. So 11 years would have paid it off. If i had refinanced for the owed amount at tipping point and continued payments the same id had owned it in roughly 8
Bro thanks for the advice !!!! I love you’re channel ! Going to pay off my truck sooner now and start looking for some property for me and my parents 😁😁
Excellent video, thank you for sharing.
Hey, great video! What's the calculator used in the video?
The only way to pay off your mortgage sooner is literally to pay extra money every month. It's just that easy and simple
Indeed! Some of us like to see numbers too
I pay loaded Principal in the first 3years. I am 11.5y ahead of schedule
I’m 18 and wanted to start learning about the whole getting a home thing , u should do a video of the basics . Basically a home buying video for dummies
I'm 25 and I'm closing (buying) my first home in 2 weeks. You'll be ready to buy a house when you have 20% for a down payment and a few thousand dollars extra for closing costs (fees that come with buying a house).
the channel “win the house you love” has an amazing video like that. helped me get the ball rolling to buy at 24
It is possible if you put your mind to it I’m sending income tax stimulus and whatever money I have to principal I stopped buying things that I don’t need
Bought my house 2019 started at 220,000 I got it down to 160,000 I’m living on nothing
Working as much as I can
I’m a truck driver btw
facts bro! same applies to car loans and student loans do not make minimum payments
If you're going to follow this advice, most of the advantage of making additional principle payments comes in the first 5-10 years. After that, the benefits wane considerably.
I did this with my cars I saved alot on intrest
Hey thanks for the content very useful for someone like me that doesn’t know much. Also as a fellow Latino you make me proud when I see you doing your stuff and have subscribed. I have a question on
how to proceed.
Currently my father is in charge of the mortgage
and I saw he has a high int. Rate and we're going
to refinance with a lower rate. HOWEVER, my
concern is about the appraisal. We plan on fixing
the house but aren't sure to do this before the
appraisal as we may end up having to pay more
for the house. Should we wait to do the home
remodeling after the appraisal?
great info i was on biweekly before but was sold to another mortgage company so now I'm just adding a extra payment per year that's all i can afford at the moment, so I'm trying to get it up there maybe when i get a raise ill up it . thank for the advice
Would love to see how inflation rates affect these ways. Are we losing money paying it early or we are still saving money despite not considering inflation
If I make a extra payments what do I tell them put it towards my interest or principal?
Infinite banking + velocity banking for the win.
Should I write 2 different checks 1 for the regular loan and 1 for just for the principal
Hello, I apologize if this was adressed or is a dumb remark, but I was told that if you save up 10k or more you can do something called restructure your loan and put that saved money directly all towards your principle thus reducing the interest faster, what is your opinion on this?
I had a few questions written down and my boy answered them all. TY
10/10
thank you for keeping this easy to understand
Great video. I paid my house in 12 years. Traditionally some decades ago, paying the mortgage in 30 years was paying three times the loan, like to say the loan is $300,000 after 30 years you paid 900,000 for the house.
Paying the mortgage in 12 years you ended paying $450,000 to $500,000. You save $400,000 to $450,000 by paying early the mortgage.
Now well, you must be a genius in business as being a regular dude with no much knowledge in investment to invest your money in stocks and make $450,000 in 12 years, but still in debt with your mortgage for the next 18 years.
At the end of the day, the best investment is to pay the mortgage the sooner the better.
Another great tip- Thanks again Javier!
Take a 30 year loan. Treat it like a 15 year in which you take the extra Savings you get and drop it into investments. You'll be able to pay off your entire mortgage way sooner than 15 years since the stock market will return more than 8%.
orale thx bro i just started putting 50 extra to my principal that should help bring down the mortgage payment
Put that extra yearly payment into the S&P you'll make more then double what you would have saved in interest.
Interesting. Are u talking about doing this for the 30yrs? Have u checked if it still makes sense even after taxes?
Thank you. IDGAF about investing, overpaying my mortgage triple payments to pay off in 27 months. Also, my credit Union automatically credits overpay $$ as additional principal payment.
Hello Javier I have a 4 Unit Apartment Building Los Angeles and have a 2 % Interest Loan . I cash flow $6100 extra a month after I pay mortgage. I want to buy a house for myself but everything to expensive . I am self employed. I owe $510,000 on Building . Should I pay it off or buy a house .
This guy is a wizard.
Thanks for the information Javier. I'm starting today.
Q:How do I pay off my Mortgage quicker.
A: You pay off your mortgage quicker.
Genius!
All the way from Boston thanks for this video exactly what I needed to hear. Gracias bro 💪🏽
I paid principal only payment every month … 500 to 1000 every month and what i getting back from taxes 1000 go to vacation the rest whatever the amount is go to the mortgage
In a scenario where a loan is paid off early with extra payments applied to the principal (inconsistent times), do you know how to calculate the interest rate (not amount) paid after the loan is paid off?
For example, if the term of the loan is 60 months with an interest rate of 6%, but someone paid it off in 50 months?
This has proven difficult to find the answer to so any help is greatly appreciated.
Thank you for breaking it down. Love your content. What site are you using to break down the principle and interest rate here?
I googled amarrocaron calculator and used the second link. I think it’s bank rate
Great video, but somethingh to realize is that the opportunity cost of this money can be high. For instance, the same amount going towards a 2% interest rate loan could be instead invested in the S&P500 and have gotten a whopping 8% average annualized return. Now, the benefit is that your 2% interest gain is "locked in", whereas you aren't guaranteed to have a positive return on the stock market, but the point still stands. The higher your home loan interest rate, the more beneficial to lock in a guaranteed rate of return.
yeah I have been paying the minimum on my 2.75% mortgage and putting my extra money into index funds. sure I will pay a buttload of interest, but I will have even more money in the stock market. as long as you can wait out any recession it seems best to invest.
On top of that if inflation ever happens it's better to have as much money borrowed as possible so you can pay back the same dollar amount with your money that is now worth less.
It's crazy to pay off a mortgage quickly with interest rates so low. Debt is not inherently bad, just high interest debt.
I understand the math but I’m risk adverse and try to get out of debt as fast as possible. I have a personal home and a rental and when Covid struck and my tenant couldn’t pay for a couple months + I had to take 4 weeks unpaid leave, it was awesome to not have mortgages to worry about at the time. I also had investments and didn’t have to sell any stock while the market was down to stay afloat. I added to my position and could “buy the dip” because I had extra money.
very good info on this channel I 100% subscribed. I wish they taught me this stuff in school its way more important that complex math equations and learning the theory that all humans came from a rock and that everything came from nothing.
All Stores Please Lower the price of all Military and Local for all Brands of House Payment Products and Interest Rates and Accessories and Production Cost Now That's too much $$ The Whole World Now 🙏🙏🙏
Great video outlining how extra payments can heavily impact your time it takes to pay down your mortgage! Question, I’ve gotten mixed signals that because interest rates are so low, I might be better off using that extra money to invest instead of making those extra payments. What are your thoughts on this? In this specific climate where interest rates are so low, should we invest that money somewhere else with bigger return, or should we put it into the extra payments? Thanks for your time !!!
To be honest with you it depends on the individual. I would put extra cash somewhere so.i can get a bigger return somewhere else
Seeing as the stock market is down 20%~ since you made this comment, the inherent risk of investing the money instead is pretty obvious. Whereas your interest savings with extra payments are guaranteed.
@@InternetUser._ 100% this. Sure a perfect scenario you could’ve made more with the money somewhere else. However if you put the money towards the balance, you are Guaranteed a lower total interest paid assuming you do it as often as possible.
I've always believed the only way you can pay it off faster is exactly that. We paid our mortgage off in 10yrs
Hi Javier, how come my monthly payment instead of going down after two year of paying went up?
You’re putting out quality content 👌🏼
Hi Javier, quick question, if we had more money than the 20% down for a home, what is the best way to pay into the home? Should we pay more into the downpayment?
Of course. The more money you have to pay for the home, the smaller your loan amount will be.
Paid off my 2019 honda civic at $22k in 2yr 8months only put 5k down payment
I've learned sooooo much about purchasing a home for the first time just by tuning in for the inappropriate jokes! 🤣
But seriously, when you make extra payments, do they automatically get applied to the principal, or do you have to call them & tell them you want it applied to the principal only?
You’re the best homie!
Simply Amazing!
Where can I get a copy of that calculator? PLEASE
Best video on interest rates so far
The effective interest method is used to determine interest and principle payment. It's not so difficult.
This was really helpful thankyou.