The Simple Hack to Ditching Your Mortgage Fast

foreign hey guys welcome to this episode of the Rachel Cruise show and today I want to talk about paying off your mortgage fast and I love talking about this because paying off your home is like rocket fuel for Building Wealth but a lot of people don't even consider paying their mortgage off early and honestly some people don't even realize that this is an option so paying off your home in less than 5 10 or even 15 years is rare but it is possible so what's the hack well making extra payments on your mortgage yep and there's a few ways for you to do this and there's also some traps that I want you to avoid so today I want to talk about why this is something you should be working towards and show you how to get started so one thing that is helpful to know up front is that although it may seem impossible to pay off your mortgage loan early around 40 of Americans who own a home own it outright yeah that's like almost half of homeowners out there you guys I mean it's crazy and there are some real benefits here so according to a recent study paying off your mortgage can reduce Financial stress which leads to overall Better Health and paying off debt has a direct effect to self-esteem and general well-being yep so we talk about a lot on the show you guys not only financially does debt you know tie you up with payments and the math and everything but when you are free from it financially you are free but in other ways you are free emotionally spiritually there's so much when you don't owe someone something and I can personally testify to this you guys it is powerful when you walk around knowing that you are free that you're not owned by anyone but the opposite is also true that when you've accepted that a part of you will always owe money to someone then your mental and physical health can even suffer so this is a big deal you guys and I want to put your money to the best use possible and that is really owning your entire income so when your income comes in being completely debt free and having the ability to do with your income what you want is so powerful now the median mortgage payment in Tennessee right now is twelve hundred dollars so I know some states it's way more some states it's way less but we're going to use this as an example and using Ramsay's investment calculator if you were to invest that amount into retirement every month for 15 years then you'd have almost half a million dollars yep so instead of paying a mortgage payment if you just invest it look how fast it grows it's amazing so let's talk about how to get in the habits of paying extra payments so the first step to ditching your mortgage super fast is to make extra payments every quarter so for example let's say you owe 220 000 with a four percent interest rates now I always recommend a 15-year fixed mortgage rate but for this example I'm going to use a 30-year because that's what majority of homeowners currently have so according to Ramsey's at mortgage payoff calculator making an extra house payment of one thousand and fifty dollars every quarter four times a year you would pay off your mortgage 11 years early and save you more than 65 000 just in interest eleven years early you guys is that how crazy okay now before you jump all the way in with extra payments there are a few ground rules that you need to be aware of check with your mortgage company first because some companies only accept extra payments at certain times of the year and they could charge you prepayment penalties so talk to them and make sure there's a way that you can say hey I want this extra payment applied to the principal not just towards the next payment so when you're paying down the principal that's going to help get it down which means again with interest and all that you'll be paying less and less and don't pay money for a fancy mortgage accelerator program no you can do this all on your own all right another strategy for ditching at your mortgage fast is by making bi-weekly payments so some mortgage lenders will allow you to sign up for bi-weekly mortgage payments which means you can pay half of your mortgage every two weeks and this causes you to make 26 half payments a year which means 13 full payments every year which again is an extra mortgage payment every single year so based on that same 30-year mortgage example that we talked about you could knock out four years off of your timeline and that could save you twenty five thousand dollars in interest now making bi-weekly payments is sometimes a great idea and sometimes it's not so the main thing that you want to look out for is extra fees some lenders allow bi-weekly payments for a small fee which can sneakily add up to one extra payment per year and that's what you're eliminating so actually you don't end up saving anything thing so if your lender charges a fee for twice a month payments say no and the third option to consider if you're trying to ditch your mortgage is to refinance AKA restructure your payments or at least pretend that you did so trading in your current mortgage loan for a shorter Term Loan or a loan with a lower interest rate can make a huge impact where we are right now you guys interest rates have gone up they really have so for some people this mathematically will not make sense but look at your own specific situation because when you go back to our original example if you were to keep paying off your 220 000 loan over 30 years you'd pay more than 158 000 in interest alone but if you switch to a 15-year mortgage with a lower interest rate you could save a hundred thousand dollars and pay it off in half the time so again let's say that you're currently have a really great interest rate and if you save on closing costs of the refinance and simply just pay off your 30-year mortgage like it's a 15 mortgage that's a great way to go or if you've already have a 15-year mortgage increase your payments that way you can pay it off in 10 years versus 15. and a lot of people when they get to baby step six which is pay off your home early we're seeing on average they're doing it in seven years so it's pretty incredible when you actually have this as part of your financial goal how you actually see it happen it's amazing okay so those are three different strategies to make extra payments on your mortgage which is the simplest quickest way to pay off your home really fast so if you're curious about the logistics of paying off your mortgage early make sure to check out Ramsey's mortgage payoff calculator I'll put a link in the description and it does all the math for you so you really can flesh out your game plan moving forward or if you're looking to refinance or Buy in the near future go to ramsaysolutions.com trusted to find an ELP in your area that you can trust and send this video to a friend who might be interested in paying their home off early and for all you guys on on the road you you can do this okay you can do this it's powerful when you don't owe anyone anything so remember to take control of your money and create a life you love

Channel: Rachel Cruze

Views: 165,050

Keywords: the rachel cruze show, the rachel cruze show youtube, money, budget, how to save money, budgeting, personal finance, rachel cruze, save money, how to budget, debt, saving money, save, how to make money, ramsey, finance, how to get out of debt, debt free, The Simple Hack to Ditching Your Mortgage Fast

Id: Qk3O9XRCS14

Length: 7min 10sec (430 seconds)

Published: Fri Jul 28 2023