How to Pay Off Your Mortgage FAST | 3 Tips to Pay Off Your Mortgage Early

are you thinking about paying off your mortgage early many people especially firsttime home buyers take out 30-year mortgages and that's a long time to be paying that debt and you're going to pay a lot in interest as well so in this video I'm going to give you three ways to apply more principal payments to your mortgage to pay it off early but I'm also going to discuss with you should you even pay off your Mor early like doesn't make good Financial sense so I'm going to go over the three ways then doesn't make sense and then you can decide for yourself whether you're are going to pay off your mortgage early or not I'm shahida Hill getting you over the hill to home ownership and helping you confidently buy your first home we are going to use an example of buying a $400,000 house and putting a down payment of 5% so that would be $20,000 and you would be borrowing $300 $80,000 with an interest rate of 7% and that will give you a monthly principal and interest payment of $2,528 we're not going to talk about taxes and insurance and that sort of thing because as long as you own that property you're probably going to still have to pay your property taxes you're still going to have to pay your insurance so we're really talking about just paying off that $380,000 when you close on your home home the lender is going to give you a amortization table that's going to tell you for every single month over the next 30 Years how much of your payment is going to go to principal and that's paying down that $380 and how much is going to go to them for interest that's going to be how they're going to profit off of this mortgage and typically that interest amount is significant So the faster you can pay down that principle the less interest you're going to pay um on the life of the loan because they're always applying that 7% to what you owe them so the less you owe the less you're going to pay over time so I'm going to give you these three different ways and figure out which one is easiest for you and which one you can afford to pay your mortgage off early the first strategy would be just making one extra mortgage payment per year so taking that $2,528 a month and dividing it by 12 and sending in to the mortgage company one extra principal payment of $210 per month and if you do that over um every year you'll wind up taking 6 years and 10 months off of your mortgage easy way to pay down that principal so if you get into the habit of sending that that extra principal payment you need to make sure you set this up with your mortgage company so that you're paying this extra principal payment $210 per month or calculate um what you have I'm going to share some tools with you so you can calculate this on your own but if you send in that extra $210 per month that's just and that winds up being just one extra mortgage payment per year you're going to wind up taking six years and 10 months off of your mortgage so that's the first way that you can you know easy way pretty much the easiest way everybody can figure out okay I can make one extra payment per year let's get to strategy number two the second strategy would be paying at least half of your mortgage payment each month so this is up and only if you can afford it so you'll be sending in an extra $1,264 every month and you would be sending that in with your regular payment and again you want to make sure you're applying that to the principle if you do not set this up so it's appli correctly with your mortgage company they may just apply it to Future payment so it's very important that you set this up but if you are able to send half of your mortgage payment in each month that would shave 12 years and 8 months off of your mortgage so you'll be able to pay your mortgage in less than 18 years and we're going to talk about whether it makes sense or not but one of the things when my husband and I bought our house we wanted to make sure our mortgage was paid off before our kids went to um college so when you're thinking about 18 years that's typically when you know children go off to college they may leave your house so if you have any like young children you maybe want to make it a goal that you'll get that mortgage paid off in 18 years and now to our third strategy this is the eight-year strategy that you saw in the title or in the thumbnail of this video if you wanted to pay off your 30-year mortgage in eight years you would have to double your mortgage payment so you're going to send in a principal payment equal to the principal and interest portion of your monthly payment if you double it for um eight years you'll pay off your complete mortgage within 8 years so this is really good the other way you can always do this you don't have to take out a 30-year loan I'm going to add this in here you can take out in some cases you can take out a 10year loan or a 50 year mortgage those are much more popular but if you want to make sure you're going to pay off that mortgage within 15 years instead of doing a 30e loan then look to see what would be the the payment on a 15-year loan but here's the question that I promis you at the beginning of this video but should you paying off your mortgage is a huge emotional accomplishment you feel okay I officially own Something Free and Clear I have nothing that I owe on it and that is something like when I said that we wanted to have our house paid off by the time my child goes to college then that was an emotional thing to say okay we're finished at least we know we have our house it's paid off it's one of our largest expenses and then you know we'll probably have new expenses as they go into college so that was one of the things but that's emotional we look at Financial our Mor our interest rate on our mortgage is about 3% and so we have to think can we make more money we invested those extra payments into retirement accounts for the most part or other Investments that might help me gain or help us gain more money over time so there could be between a 8 and 10% um chance of you um making that money in the stock market for example if you had you know your money invested in an index fund or other kinds of Investments That might have a higher yield than um you paying off a 3% or a 2% mortgage the higher your interest rate on your mortgage the more it could make sense for you to pay off that mortgage but you're going to have to weigh the benefit of paying off your mortgage and you have to weigh that emotional benefit as well because you're going to have a huge emotional benefit of saying hey I paid this off and so for me I try to balance both that we're not going to rush and pay off that mortgage but we're going to pay off the mortgage um probably earlier than the 30 years but we're also want to make sure we're maxing out those retirement accounts maxing out any other um Investments that we have as far as like 529 College savings plans before we put extra money toward the mortgage but that is still a goal of ours and then once your mortgage is paid off you can take the money that you would normally pay for your mortgage and put them into other investment vehicles so it usually makes more sense the higher your interest rate is on your mortgage and less since if you have a really low mortgage payment because you probably could make more money in investment of that extra principal payment but for a lot of people it's like a balance of you wanting to feel free from that debt um versus making sure that you're making the smart financial decision of making sure your Investments and other areas are maxed out if you have any questions about um paying off your mortgage early please put them in the comments I hope this helped you I'm going to put a link to an amortization calculator so you can calculate how quickly you can pay off your mortgage depending on how much extra you can put towards your principal and then I'll also put in a um a 401k and a Roth IRA calculator and they can average out for the most part what you might be able to earn if you were to invest that same money I hope this was helpful if you have any questions again please put them in the comments please like And subscribe to my channel for new videos every week

Channel: Shaheedah Hill

Views: 143,503

Keywords: Shaheedah Hill, First time home buyer, First time homebuyer, First time home buyer tips, shaheedah hill first time home buyer, Should your pay off your mortgage early, should you pay your mortgage early or invest, Strategies to pay off mortgage early, strategies to pay off mortage fast

Id: -m4Q3WFsxCA

Length: 8min 58sec (538 seconds)

Published: Sun Aug 27 2023