How to pay off a 30 year home mortgage in 5-7 years (2022)

Hey everybody my name is Sam Kwak one of the Kwak  brothers i'm a real estate investor certified   credit counselor as well as a serial entrepreneur  and in this video i'm going to show you how to pay   off a 30-year mortgage in just five to seven years  that's right five to seven years now just take a   look at this this is christy and she was able to  pay off close to 40 000 in just short few months   she used the strategy that i'm going to show you  in this video and this is without refinancing   without loan modification without sending an extra  principal payment to the mortgage or hurting your   credit so if you stick around to the very end of  this video i'm gonna show exactly what kristy did   to pay down her mortgage and i also have a  gift for you guys so definitely stick around   towards the end now of course i do need to  give you a disclaimer saying that i am not   an attorney i am not an accountant nor am i a  financial advisor so please consult with your   professionals before implementing any or all of  the strategy that i'm going to explain to you guys   in this video now the first thing we need to  talk about is why is your mortgage dangerous   your mortgage can actually cost you thousands of  thousands of dollars if left alone if you don't   use this strategy so i got my piece of paper here  i'm gonna use this as an illustration hope you   guys can follow with me here so i'm gonna draw a  chart for you guys as to why your mortgage is so   deadly if you leave it alone if you don't do  anything it's going to cost you thousands of   thousands of dollars and you can easily easily  potentially save a lot of money if you use this   strategy so let's go and draw this chart and this  right here is called your amortization chart and   amortization all mortgages run off an amortization  this is typically how a mortgage is paid down   over a long period of time so this horizontal  represents the amount of time you typically spend   on paying down your mortgage so as you can imagine  the left side is zero so if you just got your   mortgage this is where you're at as you're paying  down of course on the far right side is a 30-year   mark if you have a 15-year mortgage then  this will be a 15-year number but we're   talking about a 30-year amortization 30-year  mortgage now the vertical line the line that goes   up and down represents the amount of money you  pay for your monthly payments so this is monthly   i'm going to abbreviate it payment and this  is typically expressed using a dollar sign   now let's say your monthly payment for your  mortgage is thousand dollars a month nice and   even we're gonna just call this thousand dollars  a month now with that thousand dollars a month   not all of it actually goes towards paying down  the principal balance principal balance is what   we want to pay down that's the actual mortgage  amount that we want to pay down the more we pay   down principal the more equity we built which  is good it builds more wealth and we get to do   more things with our equity now the other part of  the thousand dollars is your interest that goes   to the banks of course the interest doesn't  do anything other than fact that it's a cost   of borrowing that money with the bank so the line  i'm going to draw for you guys this next line here   okay i'm going to use blue represents the amount  of interest you pay over time so you can see   here by just by the line vast majority of your  thousand dollars monthly payment for your mortgage   is going towards interest so about of course in  this example about 80 90 of it is going towards   uh interest now this is extreme a lot of times it  won't be that bad but it's pretty darn close so   this right here this zone professionals call this  the front loaded interest zone the reason why we   call it front loaded is vast majority of interest  is paid up front when your mortgage is relatively   new it's relatively young so we call this the  front loaded interest zone vast majority of your   monthly payment uh towards the beginning of your  mortgage is going towards of course the interest   it you know the banks get to pocket that money now  this red line that i'm going to draw for you guys   represents the amount of principal that you  end up paying so i'm going to label these so   that it's easy for you to follow with me here  so this is interest so blue is interest red   is principle again the more we pay down principle  the better for us it actually gives us more equity   less debt overall now if you notice something  here that that very small amount of principle   is actually paid towards the beginning of your  mortgage so if you just got your mortgage today   or you refinanced recently very small amount  of your thousand dollars a monthly payment   is actually paying down the principal so this red  zone here is all principal and you can see here   that towards the back end towards the later  part of the mortgage is actually helping us   right we have to wait until 15 20 year mark for  us to actually start paying down or vast majority   of our monthly payment is actually going towards  principal which pays down our balance so we got   to wait for a very long time for us to get any  kind of result you can see here that this system   is heavily stacked against us because here's why  this is why it's going to cost you a lot of money   if you don't use this strategy now about  a seven to ten year mark which is about   here okay no note that this is not a visual  representation of what what the 70 year 10 7 to   10 year mark looks like but around 7 to 10 year  mark something interesting happens and there's   usually two things that usually usually happens uh  today in the 21st century now the first scenario   that happens is we typically move because of a job  relocation or maybe our kids are out of the home   or some life event occurs where we end up moving  to another part of the city or completely out of   the state which in that case you typically are  going to sell your house listed and probably end   up buying a new house now when you buy a new house  and you get a new mortgage do you get to continue   the progress that you've made over the last seven  or ten years no what happens is if you get another   30-year mortgage you start all the way from the  beginning back to square one whereas where vast   majority of your monthly payment again is going  towards interest now if you made it to seven   and 10 year mark you're starting to gradually  pick up more principal payment as you paid down   but unfortunately you just got a new mortgage so  vast majority of your payment is now going back to   front-loaded interest zone ouch right this is not  not a good thing when our goal is to start paying   down our principal this is not a good thing for  our own interest nope no pun intended there so   that's one typical event that happens that sets  us back when it comes to paying down our mortgage   the second scenario that typically happens and  this is more frequent and that is refinancing   you know what typically happens is you get your  mortgage broker or banker that may call you and   say hey mr mrs borrower congratulations  you've done a great job paying down your   mortgage for the last seven or ten years hey  tell you what come on down back to our office   let's go and get you refinanced we'll turn  this thousand dollars monthly payment into   900 a month payment and of course most people are  like oh my gosh that's 100 less we're paying right   now therefore we're saving money we can take  that hundred dollars and do better things and   of course that's what most people think now the  problem is if you do choose to refinance because   of a lower rate or maybe you get seduced by  the lower monthly payment what happens is   you start all over back to square one where vast  majority of your monthly payment is going back to   your front loaded interest zone congratulations  right you don't get to progress you don't get to   continue if you refinance into another 30-year  mortgage which typically happens more than more   than anything so what happens is you're in a  continual perpetual cycle of never ever getting   to the zone where vast majority of your monthly  payment is going towards principle that is the   problem there lies a problem where either we sell  and we start a new mortgage or re-refinance into   another 30-year immigration where vast majority  get monthly payments going towards interest so   we're constantly stuck we're constantly stuck in  this front loaded entry zone because we're either   refinancing or getting another mortgage not a good  thing the odds are stacked against us and it's   time for us to change what we're doing because  if we trying to do the same thing over and over   and over again expecting a different result that  is the definition of insanity and we i'm pretty   sure you're not insane so let's try something new  that could get us to the principal payment zone   the back end zone very quickly our goal is  to get to this zone in less than seven to   ten years in fact i want to help you get there  in less than a year using this very strategy so   i want to introduce a new tool we need a new  instrument that could help us get to that zone   quicker than our 30-year mortgage and i want to  introduce you to something called home equity   line of credit this is also abbreviated as a  heloc now you may have heard this heloc before   and there's a lot of myth that we need to bust  because there's a lot of false rumors and false   information that surrounds the concept of home  equity line of credit now let's go and make a   distinction between a heloc versus a mortgage what  are the main differences because there's quite a   bit of difference as far as the main differences  between a heloc and a mortgage first of all   a heloc is open-ended okay so it sounds good  open-ended right it sounds like we're opening up   our arms right sounds good but with the mortgage  it's close-ended meaning once you make your   mortgage payment to the bank you can't get the  principal portion back right you can't borrow back   with a home equity line of credit once you make  a principal payment on the heloc you can also   reuse that money whenever you want so this is  reuse and payback very very good but you can on   this side on the mortgage side i'm just going to  stick with green here you can't reuse it there's   no reusing all if all you can do is just pay it  back and that's all the option you have the second   thing is of course with the mortgage the interest  is amortized and with the heloc on the contrary   is open-ended simple interest okay often known as  average daily interest i'm going to abbreviate it   average daily interest and third thing mortgages  of course can be variable and fixed so v and   f variable and fixed now here's the myth  that i want to bust is that not all helocs   are variable they can also be fixed as well as  far as the interest rate goes so there's a lot of   people that say oh sam the heat lock is variable  you know it's high you know it's not a good thing   why are we using a high interest rate heloc  to pay down a lower interest rate mortgage   well i want to tell you and you know bust the myth  here that number one not all heloc interest rates   are high in fact a lot of times if you get a first  lean position heloc a heloc interest rates can be   anywhere between three to five percent i actually  seen a client of mine who was able to get a heloc   at 2.5 percent fixed which is very very good so  yes you can fix the interest rate on the heloc   and key lock interest rates are also very  competitive and comparable to your you know   conventional 30-year fixed as well so i got to get  that myth out of the way because a lot of people   sometimes like to ask me that question hey  isn't he lock interest rates higher not all the   time even though the heat lock can trade may be  higher i want to show you why it comes out ahead   when compared when using it to pay down your  mortgage so just know that big difference i'm   going to put a star on the open-ended as well as  the simple because those are two big big big big   things that you have to know open-ended meeting  again you can pay back reuse simple interest   average daily interest i'm gonna get to that  in just one sec as to how that's different   than your amortized interest so let's go and  talk about this average daily interest average   daily interest and i promise you guys i won't bore  you with math i know math can be boring trust me i   i get it i'll keep this fun and hot and sexy okay  yes i set the word youtube's [ __ ] gonna ban me   now but in all seriousness guys i'll keep this  fun now average daily interest is how the heloc   calculates interest and charges you interest very  very important as to how we understand it because   sometimes if we miss it you're not going to get  the strategy so here's how the average daily   interest concept works watch and pay attention  very carefully now the way the average daily   interest works is takes the interest rate okay  percentage so that's the interest rate divide by   either 365 or 360 days depends on 360 days  it depends on what bank you go to sometimes   the bank uses a 360 days which is a commercial  lending year or 365 which is of course that's   how many days are in a year and so interest rate  divided by 365 or 360 times the balance of today   equals interest percentage amount that we  pay so here's the logic behind this and i'll   break this down in a very easy understand the  interest rate for the heloc okay so let's say   five percent or four percent divided by 365  days which will get a very very low number   times the balance for that today so if our  balance today is hundred thousand dollars okay   and then let's say our interest is i'll call it  five percent and we'll use 365 okay so i got my   calculator point zero five is essentially the same  thing as five percent divide by 365. again we got   a very very very low number we're gonna times  this by a hundred thousand dollars which is our   balance for today equals 13.69 so that's  the amount of interest that we are charged   this very day so there's not enough rooms  i'm going to put it down here six uh 13.69 so   if our balance changes tomorrow right if today  was 100 000 what if the balance goes from 100 000   down to 95 000 wouldn't our interest amount  change too right because we have a decrease   of 5 000 dollars on our average daily balance  therefore our interest also goes down as well   very very important to know this concept because  obviously if we don't then it's gonna be hard for   you to understand the strategies so why  this is very important is that the heloc   interest can change every single day if today's  hundred thousand dollars and tomorrow is 95 000   our interest amount that we are charged today  versus tomorrow is gonna be completely different   so that's what we need to know about average  daily interest so let's get to the fun part   let's go and explain how this strategy actually  works in a visual representation now this is just   one version out of many there's fact seven that i  can count just on top of my head there are seven   different versions of the strategy i'm going to  give you one that's actually relatively popular   especially with the economy the way it is  and that's probably a question that you have   you know how does this work with the recession  how does this work with the covet 19 pandemic   i'll explain all those questions in just one sec  but the question that you probably have right now   at this given moment is sam are the banks still  lending because of the pandemic i mean are they   still doing it because there are banks that  completely shut down their heat locked apart   now my answer is a resounding yes the banks  are still lending on heloc's not all banks are   but the banks that are still doing it they're  still qualifying people and they're doing it   just fine so yes banks are still lending it's not  gone it's not going away he locks will be around   to stay so here's how the strategy works and this  revolves around using what's called a first lean   heloc now of course if there's a first thing heal  out there's also a second lean heloc which is more   of the traditional heloc that most people get but  there is a concept of a first-line heloc now the   way the first thing he lock works is let's say you  have your mortgage here so this is your mortgage   and let's say you have a balance of 200 000  so that is the actual amount that you owe to   the banks for the mortgage 200 000 right  now what happens is when you go and get a   first lean position heloc you'll typically  get anywhere between 80 to 90 loan to value   in establishing the limit now loan to value for  those don't know is what they do is they take the   appraised value the value of your home and times  it by ninety percent so let's say your home value   is three hundred thousand dollars so i'm  just going to use the math of three hundred   thousand dollars and what we're going to do  is we're going to go 300 000 on my calculator   times 90 and that leaves us with the 270  000 number so that 270 000 is your limit   okay so this is heloc 270 000 limit so imagine  having like a credit card that is attached to your   home equity with a limit of 270 000 so you can use  up to 270 000 in terms of your home equity line of   credit so how this works is what we're going to do  is we're going to completely pay off and replace   our mortgage with the 270 thousand dollar limited  heloc so what happens i'm going to use a different   color to to annotate this the 200 000 principle  is going to be quote unquote transferred into   the home equity line of credit now the actual  mechanism of this is we're going to just write   a check out of our heloc to do a principal payment  against our mortgage so we're going to do 200 000   so what we've done is essentially did a balance  transfer right we took uh 200 000 mortgage balance   moved it to our home equity line of credit balance  and now we have a 200 000 balance on our heloc we   no longer have a mortgage mortgage is gone and the  only debt that is on our property is a heloc so   the heloc is your only debt on your property it's  the only thing that you're pretty much owing on   the home so there's no mortgage just one single  debt now you might be saying well sam this just   seems like you know robbing from paul to pay peter  well not quite because remember how explained that   the heloc interest is completely different how  the calculation works is different than a mortgage   so the way that we pay back the heloc completely  different very efficient and effective the way   that i'm going to show you so here's how the rest  of the strategy works now typically you got your   income coming in and what you've used to do is  you took your income and put it in your checking   account now let me ask you this how much are you  getting paid to put your money in your checking   account like zero right if you're lucky you know  you probably have one of those checking account   that gives you maybe what point two five percent  point maybe one percent i don't know but this is   normally normally zero percent annual percentage  yield you don't get paid much even if you do pay   and put it put it in your savings account you're  probably still getting point five percent annual   percentage yield not a whole lot of money and  inflation is two percent so literally even if you   put your money in your savings account your money  is eroding away on inflation at two percent every   year so not a good thing for you right the odds  are stacked against you when it comes to savings   so instead of parking and leaving your money  in your checking account why don't we throw   that money all of your income all of your income  and savings into the home equity line of credit   where by lowering the heat lock balance by all of  your income right you can expect to save anywhere   between two to five percent interest because  you're lowering the the balance average daily   balance so let's say for example the income  is you know six thousand dollars okay i'm just   using an example here right so six thousand  dollars lowers the 270 000 balance down to 264 000 so if our interest rate  is five percent on the heloc   five percent on two and seventy thousand dollars  is going to be a higher interest amount than   five percent on 264 thousand dollars at a given  point of time and we want to keep this balance as   low as possible and keep it low for a long period  period now what typically my clients do is they'll   keep this low for anywhere between 21 to 30 days  because each day that the balance is at 264 000   they're paying interest on 264 000 the very moment  that this balance goes up to anything higher than   264 they're paying more interest over time so  what they do is this is something that i don't   typically give away for free but i'll give it  to you because of course what the heck i love   you guys okay which by the way subscribe to our  channel and hit the like button if you guys are   liking this so far and if you guys enjoy my  of course presentation so 21 30 days we're   going to keep this balance as low as possible so  here's what my clients typically do i'm going to   redraw this because there's a lot of mess going on  here so uh we got our heloc i'll make this quick   and our mortgage here and our mortgage is no more  so what happens is all the income goes in to the   gila and what they do is they use a credit card  in the middle and i know i can hear you know your   disgust a credit card right you guys don't like it  and so do i i don't like credit card debt they're   absolutely terrible but here's what we do with  the credit card we do all of our expenses with   credit cards so we do groceries gas maybe you got  kits right you got general other expenses bills   everything is on the credit card and what we do is  at the end of the billing cycle we completely pay   off the credit card and use blue pay this down to  zero using the funds out of the home equity line   of credit now here's what happened most credit  cards don't typically charge you any interest   for 21 to 30 days after the purchase so let's  say you and i go to a grocery store today use our   credit card and let's say we spend 300 bucks on  our groceries you typically don't pay any interest   on that 300 grocery bill until the next billing  cycle unless of course we pay it off completely   at the current billing cycle which of course you  know we don't owe any interest now another benefit   to using a credit card this way is it gives us  points and man do i love points man in fact i   just booked a vacation and don't tell anybody  but all the expenses car rental uh flight hotel   has been covered by points i love points points  are amazing but the best part is i don't pay any   interest because my credit card balance is always  at zero i'm not carrying any balances from month   to month so here's what we've done we've taken our  six thousand dollar income shoved it into our key   lock where the balance of the heloc goes down  it stays low all of our expenses are paid out   of the credit card therefore we're not touching  the heloc because the moment that we we touch the   heloc or we take any money out of the heloc we're  increasing the interest that we owe on the heloc   so what we do is we put it on a credit card and  then once towards the end of the statement period   we completely paid off using the funds out of the  heloc the heat lock balance goes up but guess what   in just short few days we got another six thousand  dollar income going in to lower the average daily   balance which means lower average daily interest  as well so this is one out of seven different   versions there's so many different versions out  there that of course depending on your situation   your lifestyle your finances the strategy changes  but this has been a very good working model   for a lot of my different clients and they've been  saving tremendous amount of money and of course   um some of you guys this might not be a good fit  due to lifestyle or maybe tolerance to risk but i   can tell you guys right now that this strategy is  perfectively recession-proof meaning that if you   do it the right way if you if you do it with  proper guidance and with the proper training   this strategy can actually help you through a  recession it can actually uh put a safety net   with a recession and yes i get questions like you  know saying what if the bank closes down or shuts   down my heloc like the last recession that we have  back in 08 to 2012. if you use it properly and of   course with some education behind it the chance  of your heloc closing down is virtually zero in   fact one bank that we've worked with in the past  none of the clients had their first lean heloc   shut down frozen or had any adverse financial  setbacks in the 2008 to 2012 crash again a heloc   is just a tool how you use a tool is up to you and  of course if you for example use a chainsaw to cut   down trees that's good but if you use a chainsaw  to hurt other people not a good thing so a heloc   inherently is not a bad thing it just depends  on how you use the heloc and of course that   requires some knowledge and education now guys i  did promise a gift at the end of the video and i   want to congratulate you for making it this far  because it tells me that you actually care about   your finances you're one of the few people that  actually want to enact change to your finances so   that you can improve and save money and do other  great things so i want to give you the gift right   now and that is a free calculator to show you how  much money and time you could potentially save   using this very strategy so this is really cool  you get to enter your income your expenses your   mortgage balance your interest rate and at the end  it's going to spit out a number basically showing   you how much time you can save how much money you  can save and of course these are estimates but   gives you motivation gives you excitement so  where you get this calculator is chop my mortgage dot com like chopping your wood down right chop  mymortgage.com go get your free calculator to see   how much money and time you can potentially  save using this very strategy and after you   download the calculator i'll give you some more  information and training on how to actually use   a strategy for your own scenario and for your  own situation so go and get your free calculator   chop mymortgage.com you guys are going to love  love what you see and sometimes you may get an   error it's typically a user an error maybe you  get something that says never when it comes to   the result or maybe you get a result that you  don't like it's likely that you didn't use the   calculator the right way which of course after  you download we've got some instruction videos   and training videos they can watch to actually  get some deeper dive into how the calculator works   of course and how the strategy works as well  so guys i want to thank you so much for tuning   in and watching this video all the way to the  end i mean you're amazing and with that being   said if you guys want to learn more about the  strategy how helps work what is a heloc how   do i get approved all that video is right here in  our youtube channel so definitely go subscribe if   you want to see more of these videos we also cover  other content such as real estate investing stocks   investing in general how to make more money how  to save money we have a lot of videos on how to   help you make money as well as keep more money  so with that being said guys love and appreciate   all of you subscribe and i'll see you guys in  the next video don't forget to download the   calculator right here chop mymortgage.com and  i'll see you guys in another video take care

Channel: The Kwak Brothers

Views: 386,016

Keywords: how to pay off your mortgage early, how to pay off your mortgage in 5 to 7 years, pay off mortgage early, how to pay off your mortgage in 5 years, paying off mortgage early, pay off mortgage in 5 years, paying off mortgage, first time home buyer, mortgage, debt free, how to pay off your mortgage faster, mortgage pay off early, homeowner, mortgage pay off, pay off mortgage, mortgage payoff, how to payoff your mortgage quickly, mortgage payoff journey, saving money tips

Id: eGVn9iq1e6c

Length: 25min 58sec (1558 seconds)

Published: Wed Dec 02 2020