How to PAY OFF A Home Mortgage in 5-7 Years WITHOUT Locking Up Your Money / Garrett Gunderson

some say the best thing you can do financially is pay off your mortgage but most methods are slow risky ended up locking up precious resources along the way you could give the bank extra money by following the old way of doing things or you can do exactly what the banks do by legally and ethically rigging the game in your favor [Music] so do you want to pay off your mortgage without destroying your quality of life is bi-weekly payments extra payments shortened terms or cutting back on costs well those are only going to create suffering and destroy wealth in the long run so if you want freedom sooner than later but don't want to take risks to get there pay close attention look banks have the largest buildings in pretty much every city they have special rooms just for the loads of cash they have as well i mean that's pretty impressive right i just got a room for my cash they don't have a product just a service the service of selling your money that they're currently renting renting for very very cheap last night i was talking to my son he's like i don't get how banks make money and i was like well you know how they give you that lollipop he goes yeah i'm like that's to let you know you're a sucker yeah well what is it that they do well why do they got such big buildings uh what are the rooms up above the lobby well let me break this down into three simple parts for you one let's talk about how banks make money and i'll answer my son's question here if they give you 25 cents for depositing a hundred dollars for the year right because you're getting a quarter of a percent and they can turn around and sell that money for three dollars that's a pretty good return so just go look go into a bank or credit and look and say what are they paying on their money markets their certificates of deposit their savings accounts and then on the other side they'll all go what are they charging what is it for a car loan what is it for a mortgage what is it for a signature loan what is it for a credit card and what you're going to see is they're giving you a measly amount of money and they're marking it up extraordinarily to give to other people all right let me let me use this example of you know they're renting your money for 25 cents right and they're selling it for three dollars pretty pretty good markup i don't even know what is that percentage you know because if if they're renting it for 25 cents and sell it for 50 cents that's 100 markup so they're getting like a thousand percent on that example now let's just say that you are a landlord right and you could get a piece of real estate that you had to pay let's say 250 bucks a month for but you could turn out turn around and lend that out or rent that out for three thousand dollars that's basically what the banks are doing they're going here we'll pay you rent 25 cents and then we'll go charge someone else three dollars that's crazy that's not even the whole part of the story they can lend the money out more than once there's you make a deposit into a bank they can lend that money out but then someone else gets that money and they put another deposit so it's called fractionalized banking they lend dollars more than once right it's not like it just stays out of the system it goes back in the system and there's a little bit of reserve requirement but it can still continue to be lent for a bank are they really in the business for cash flow or accumulation you know we've all been taught that it's about accumulation wait for 30 years compound interest slow and steady wins the race invest early often and always you know scrim save sacrifice defer delay accumulation is an antiquated game that is destructive they don't care about accumulation they don't take your deposits and put in retirement plans they take your deposits and create cash flow so are they rich because of mutual funds are they rich because of retirement plans absolutely not they are rich because of cash flow and let's talk about how they manage and mitigate their risk when you get a loan from a bank you know especially a mortgage they want a down payment because if you don't do enough down payment there's private mortgage insurance right there's private mortgage insurance and that's if it's less than 80 percent right if or less than 20 down and you borrowed more than 80 they want to charge you an insurance cost in case you default and if you've ever been through the loan process talk about due diligence it's kind of like tmi i can't believe the number of things they they want to know they want to know your blood type they want you know know how many moles you have okay it's not that bad but it is your credit your taxes your cash flow reporting how much money you've had in a savings account for a certain period of time you know they're looking at so many different things they're getting appraisals i did a refinance on my house required two appraisals right they want to know what kind of collateral you're offering them and you have to pay for the appraisals so there's so much personal information that they're looking at here for some loans it's personal guarantees that say if you default they can come after your assets or a required amount of deposit at the bank before they'll lend to you and they do all sorts of things to incentivize you to improve their cash flow the more you pay them the shorter the term of your loan it starts to reduce the risk because you're creating equity with your dollar again they're in the cash flow business they're charging less for shorter terms because they're saying hey shorter term we have more control of our money knowing most people are going to refinance or move anyway so it increases their return if they shorten the mortgage they can sell that paper meaning have you ever gotten a mortgage and then all of a sudden it was one mortgage company and then it gets you you're paying a different company that's because they sold the note they can sell a shorter term note like a 10 year or 15 year for more than a 30 year because it's increased cash flow and again there in what game the cash flow game so the second piece here is be careful not to put yourself at risk because if you lock yourself in with the bank then you start to put yourself at risk so think more like the bank you don't have to wait 30 years to pay off a 30-year mortgage i know that most people think oh 30 years that's forever but you can actually pay that off in a year or three years or five years when you have enough cash but a lot of people try to pay that off by paying the bank extra and i call that equity gel money's now stuck in there where you have to have good credit or have a good situation and a bad economy might wipe that out so it might be hard to get access to that cash and it might be the very time you need it that's hard to get access to so if you shorten your loan it will increase your payments yet you don't necessarily save interest stay with me for a second here you always pay interest you always pay interest whether you pay cash or whether you finance what does that mean if you pay cash you pay interest well the way there's an interest cost is you forfeit the right to earn interest on your money if you pay cash for something it's obvious if i borrow money i have to pay interest to the institution but if i pay cash i lose the opportunity to earn money that's called our cost of money cost of money is the highest rate of return or that you can earn or the highest rate that you pay for what you borrow it's basically telling you kind of what your hurdle rate is or what the basic you know if you're comparing something hey if i could give you a loan at zero percent interest how much do you want you greedy so do you want all of it of course when you want to pay me back never i'm not going to lend it to you but no of course if you can do better than zero percent why not take as much as you can that's called arbitrage you're making more than what you pay now if i'm going to charge you 10 yeah that answer changes drastically right it might be like i don't need any of that money unless you have a very short-term loan or really lucrative business opportunity right or really high interest rate credit cards because it's about your cost of money what can you earn versus what can you pay now if i can get a loan at one percent and i know i can earn two percent very certainly very high guarantee to that i'm gonna borrow the money but if i need to borrow at seven percent and i only feel really comfortable i can get five percent maybe i'm better paying that off but how you pay it off is key so when you have higher interest rate loans that's your cost of money if you have a 23 credit card your cost of money is every dollar you spend rather than paying that down is costing you 23 and if you shorten your mortgage which is a lower interest rate you're taking money away from paying off that higher interest rate credit card be careful because the difference between what you could have paid to the cards versus what goes the higher payment on the mortgage is actually costing you money now what happens when there's cash flow crunches pandemics recessions job changes losses keep control of your money i'm gonna say it again keep control your money don't put your home and cash at risk banks love to lend money to people who don't need it yet hate don't want to give it to people who are in trouble one argument from comments in my past videos is man i paid off my loan and now my finances are exploding i don't know if they understand cost of money because of those investments were doing so well they could have paid off their home faster by investing the money and then taking that lump sum and paying it off but we have to separate two things method and objective method is about what you're going about doing and how you do it objective is whether you want to pay off a mortgage or not now i have a cabin that i love it's as nice or nicer than my home pay pay there's no mortgage but i have a home with a mortgage interest only i'm not going to stay there forever super cheap money i can guaranteed earn a higher rate with my cash value cash flow banking policies then i would be paying on that so that's fine for me but it's not for everyone some people can't sleep at night they lose peace of mind they feel frustrated you know and they're like i just gotta get this mortgage monkey off my back and then i'm gonna feel so much better i understand peace of mind versus economic sense try to have both but look it doesn't matter if it makes economic sense and you lose sleep at night because you're your greatest asset not some stock bond or piece of real estate and if you can sleep easy by paying off that mortgage do it but do it safely don't just hand the money over with the method by paying extra do biweekly payments which is actually a one full payment more per year or by shortening your mortgage therefore locking you into higher payment you've got to be really careful to make sure that you keep control your money that you maximize your tax benefits that you have security and then you can pay that off when you have enough cash now if you tell me you know what people aren't good they're not disciplined they're not going to save that money on the side well guess what if you're not disciplining your train wreck paying extra that mortgage means you're more likely to lose the home because if you're a train wreck financially when problems happen you're not going to have liquidity you're going to have debt you're going to have all sorts of money on credit cards that are financing that higher house payment let's think about that for a minute that kind of get pissed about that because so many people are negative about it and so many people are so emotional when it comes to their mortgage i just want you to have the intelligence to know what you're doing and then match that to what makes sense for you emotionally i'm not saying whether you should have a mortgage or not have a mortgage hey in an ideal world we would never have mortgages we'd only buy homes with the cash that we've saved up but that's not how this world's working right now but we've got to be careful not to be overextended over leveraged or unintentionally putting ourselves at risk by paying more or shortening that mortgage now what i find is the higher the emotion the lower the financial iq what about doing an interest-only loan where when you pay down extra it lowers your payment versus an amortized loan that when you pay extra it doesn't lower your payment it shortens the term where you're going to pay it off sooner but it doesn't lower the payment and you still get fixed at a higher payment and when you're in a you know a mortgage that is amortized you're paying so much interest up front as you can see on amortization schedules but we're always paying interest if i can earn five or pay five it doesn't matter whether i pay off the mortgage or whether i earn the money it's a it's a break even it matters mentally i feel better paying off the mortgage or having access to cash that's something only you can answer there's also interest-only variable loans i'd be careful with those variable loans there's a thing called velocity banking you'll hear about a lot where people use home equity lines of credit where you can pay it down and you can pull it back up what they'll do is they'll just charge everything on a credit card for the month and float that money because they don't have to pay interest if they pay it off in full take all their paychecks and pay down that line of credit then pay off the credit cards at the end of the month the problem is what if the bank loads your line of credit when you've been paying that down and you're going to pay off your credit cards or what if interest rates go up in the future and that's a variable interest rate and maybe you're still on that mortgage so just be careful about some of those risks even though i've done other videos and information on velocity banking to kind of help people out that's something to really understand now when you go shorter than 30 years in an amortized loan you're going to create equity gel by the extra money that you've paid first and foremost but also because that front end loaded piece of the interest as well what if you lowered your payment the minimum it could be and save the difference we always stay in the home that's a question you really need to ask what could the cash be doing instead i'd rather see a loan paid down rather than invest in speculative things like the stock market no doubt about that but what if you had something on the side as far as cash flow banking dot com or something like that that gives you options that if there's a cash flow crunch you can make your payment you have a lower payment because you have a length and loan you know you maximize some of your tax benefits which shouldn't be the main reason you do it but a consideration i've mentioned by bi-weekly a couple times let me just say it's a tricky way to get you to pay more frequently you pay every two weeks rather than pay once a month but there's 52 weeks in a year so if you're paying every other week that's 26 payments but if we divide 26 into two that's 13. that's an extra month's payment because you're paying more frequently sure you'll shorten the loan but you'll also end up with more cash out of your pocket and that's what people aren't thinking about or always considering so the considerations i want to leave you with is what's your control of cash what kind of liquidity do you have what can you earn on your money what are your tax advantages if you want to like get into this deeper you can go to wealthfactory.com forward slash megakit i've got a cash flow guide in there i've got killing sacred cows i've got what would billionaires do and here's the deal it's on me exchange your email so we can stay in contact and i can let you know what we're up to and yes i'll make offers here and there but it's going to really help you build your cash flow and keep your money safe now the final point i want to make here is what if you just set up your own banking system what if you stored the money at a place that had guarantees to compete with what you were paying on your mortgage and then you could actually save that cash what if you were to earn interest greater or equal than what you were paying in today's low interest rate environment and plus what if we look at taxes what if you had tax advantages and grow the money without tax get tax deductions on your mortgage interest if you qualify and create a killer strategy of how to get cash flow from your paid off home in the future yeah it's in the download i already mentioned but it's over funded cash value insurance that allows you to be tax deferred with your earnings but you get to take it out fifo which means first dollars in or first dollars out which means that you don't pay tax on the money that you put in ability to access cash along the way through loans which can avoid tax as well with some benefits if you become disabled the premiums will be paid for you if you have waiver or premium or accelerated benefit riders that say if you ever qualify for long-term care you can use your death benefit to pay for that rather than your other assets even downside protection and asset protection where liability and bankruptcy they can't come get this cash and that once you have interest or earnings it's guaranteed with the minimum interest rate plus the death benefit can unlock a lazy asset in the future like a paid off home you get way more out of it there's just way more options if you want to learn more about that read it inside of the book what would billionaires do and i would recommend going to cashflowbanking.com for more some say the best thing you can do financially is pay off your mortgage but most methods are slow they're risky and they end up locking up precious resources along the way look you can give the bank extra money by following the old way or you can do exactly what the banks do by legally and ethically rigging the game in your favor it's time to get the best interest rates with the type of loan that fits you you can pay off the loan with less risk more benefits and a lot more control now you have the knowledge to transform your thoughts into profits and build the life you love if you're looking for more on this topic check out my video on how to start paying off debt you'll learn the most optimal way to pay off a loan i'll see you there

Channel: Garrett Gunderson

Views: 58,462

Keywords: Garrett Gunderson, Wealth Factory, Wealth Building Strategies for Entrepreneurs, Financial Freedom, Financial Independence, Getting to economic Independence, what would the Rockefellers do, business, success, entrepreneurship, How to PAY OFF A Home Mortgage in 5-7 Years WITHOUT Locking Up Your Money / Garrett Gunderson, How to PAY OFF A Home Mortgage in 5-7 Years WITHOUT Locking Up Your Money, Money Matters

Id: ZI4bF-lCNy0

Length: 14min 28sec (868 seconds)

Published: Wed Nov 25 2020