How to Pay Off your Mortgage in 5 Years

How to Pay Off your Mortgage in 5 Years


this is Sam Kwak, one of the Kwak
brothers, real estate investor, and the author of the book, fire your boss and in
this video I want to show you guys how you can pay off your mortgage within
five to seven years. Now, Before I go on with the breakdown and the explanation
of the strategy, I want to make sure you guys get some disclaimer so that you
guys are protected and then I am protected as well so real quick I am NOT
an attorney I am NOT a CPA nor am i a financial planner so anything that I say
or mentions of legal tax or financial planning advice please don’t take it as
an advice but rather as a suggestion based on my own experience and my own
understanding of the strategy now this is gonna be also a short 15 less than 15
minute video so make sure don’t try this alone okay if you guys have any
questions if you guys any need any help if you guys need some personal help I’m
gonna leave a link down below at the end of this video I’m gonna give you a link
to go to to see further explanation and I’m also gonna give you guys a little
more breakdown in that in the link that I’ll send you to at the end this video
so make sure you guys understand that I get it there’s other videos that will
show you this strategy but remember it’s really crucial that you get some help a
third party or a third pair of eyes sort of speak to help you guys use the
strategy so the purpose of this video is just give you an overview an idea a
possibility on how you can implement a strategy in your own situation so that
you don’t have to pay you know a huge sum of interest and spend all the time
the world trying to pay off your mortgage so let me go ahead and flip the
camera around and I’m gonna show you guys using a marker and piece of paper
give you some illustrations and how these how the strategy will actually
work all right guys I’m gonna flip the camera around so I’m gonna show you guys
to break down and and these explanation as far as how this strategy works now
before I get to the actual strategy I want to show you guys how and why
mortgages work right and why I think they are inefficient so I’m gonna break
down the mortgages in a chart for you in relation to interest versus principle
now for those don’t know what principal is principal is the actual loan balance
so if you have a hundred thousand dollar loan
you’re bound your your principle balances $100,000 get it interest is is
the expense that you pay to use the bank’s money okay that’s basically
bank’s profit so I’m going to draw the chart for you here
the x-coordinate it is time so we’re gonna label with zero months this is
gonna be 30 years and right between is 15 years okay this is gonna be your
monthly payment amount monthly payment so let’s say we’re gonna give it a give
a good example here a hundred thousand dollar loan okay five percent interest at 30 years a ssin it’s gonna be just
around about four or four hundred dollars right and guys don’t quote me
here I don’t have the amortization calculator in front of me but based on
my experience it’s around four hundred bucks for principal and an interest of
all so with that four hundred dollars in mind this curve here is gonna be your
interest payment and this curve here is going to be your principal balance so if
you guys notice that first you know the first half fifteen years
bulk of your hundred payment is actually interest payments right in the early
months very little is gain taken out of your actual hundred thousand dollar
principal balance so in that four hundred dollars most people think that
if we make that four hundred payment our loan is going back down to ninety nine
thousand and six hundred bucks right guys that is not the case in fact maybe
like fifty hundred bucks if not even less are gonna be the actual principal
payment that’s gonna go and lower the the balance from a hundred thousand to
you know the principal payment whatever we’re subtracting here so do you guys
see how the first fifteen years you guys are actually not making much progress as
far as paying off your loan in fact the first ten to fifteen years this is where
the banks make money thanks profit does that make sense guys so
what’s really interesting and for me it’s kind of entertaining most bankers
will come to you and say hey you know it’s been about 10 years how would you
like to refinance your mortgage for a lower payment how would you like to pay
$350 instead of $400 right most people would say wow you know I’m saving $50
that’s actually a pretty good thing but what sucks is that and what they don’t
tell you is that we’re basically resetting our clock back to zero months
and we’re paying all of this interests all over again kind of sucks isn’t it
right we’re actually paying more interest by refinancing by resetting a
clock back to zero right because if we did a refinance and continues and paid
to 15 16 17 18 and so on we’re actually gonna be making more that principal
payment and we’re actually gonna be doing much better in our progress as far
as paying off our our principal balance now what’s really important is that this
is something that you should know if you guys are taking notes or if you guys
have pen and paper in front of you the lower the principal balance right as the
principal balance gets lowered so will be interest right I’m a huge Star Wars
fan so I’m gonna make this reference if you if you destroy the shield generator
the Death Star is open to being a you know vulnerable I know guys I’m a geek
I’m in there I wanna that’s the best reference an analogy can give you so
kill the principal and you’ll also kill the interests too so it’s really
important that we take the principal balance down so that we’re not paying
interests does that make sense so that’s one of the pillars or I should say the
core kind of supporting you know methodology to making this strategy work
okay now the other ins illustration on a hundred thousand are alone at five
percent interest okay I know I can’t spell here 30-year
mortgage EMAS ation most people think five percent interest is not bad okay
but little do people know that actually will amortize and will become compounded
to actually be coming around 80,000 to $100,000 on interest alone so on that hundred
thousand dollar loan that’s the principal balance on a 30-year Bogey’s
30-year amortization five percent interest we’re actually paying hundred
thousand dollar interest alone plus our original loan amount is gonna be around
one hundred eighty thousand to two hundred thousand dollars we paid to the
bank now guys if we’re gonna pay her thousand dollar interest we just bought
a bank another house right we got a house and they got a house so you know
you guys can see how mortgages kind of suck doesn’t it
right we’re paying a lot of interest take so long 30 years that’s like you
know that’s that feels like forever it really does right I’m actually scared
that some of these banks are coming out with fifty realization for you know the
pseudo pseudo loans that is crazy right that is insane that’s ludicrous this
shouldn’t be the case and that there has to be a better way in paying off our
property there has to be a better way to buy houses without paying 100 percent
interest to the bank there is there is a methodology there is a strategy that I’m
gonna show you and this is why you’re watching the video right to pay off your
mortgage faster and you guys probably already know this right this is all
gonna be in what’s called Truth in Lending statement banks will give you
this and though they won’t tell you the truth and how mortgages work
now there’s another debt instrument that that I like to use to pay off your
mortgage way quicker and with this strategy we’re gonna accomplish are
these these are the objectives or I should say the overall concept overall
finished touches as far as how the strategy work so this strategy is called
velocity banking what we’re doing is we’re we’re accelerating how our debt is
being paid and it is known that about sixty six percent interest savings with
this strategy we’ve got about sixty six percent of time saving as well and it’s something some cases 5 to 7
years of total payment amount and we’re gonna keep the same amount of expenses
alright we don’t have to incur more more loss we’re not paying a penny more on
the mortgage trust me and same amount of income so I’m not
gonna tell you to go get a better job not gonna go tell you – you know skimp
and save right save and save every single penny right I’m not gonna tell
you to go clip coupons guys what I’m telling you here what this strategy will
help you is still keep the expense the same still keep the income the same same
way but we’re saving 66% an interest and 66% on time of of the payment period
cool and some of you guys might be saying this sounds way too good to be
true this has to be some sort of scam right or something guys may say this is
too risky this is two different guys I’m gonna show you the overall general
concept as far as how this work and the math behind it now this is the only
gonna be a short video you’re not gonna get the full understanding I get it most
of you guys want that’s what I’m gonna I’m gonna share a link at the end of
this video on on a live example I’m gonna actually show you a spreadsheet an
Excel spreadsheet and give you guys the actual breakdown as far as how the
strategy will work in numbers but for now I’m giving you guys the concept so
I’m gonna introduce you guys a new debt instrument a new way I knew I should say
a revolution right but this has this actually has been around for a little
bit and most people don’t know it’s called home equity line of credit also known as a HELOC now the banks have
been selling this product for about 15 17 years it’s been around for a little
bit but the reason why bankers don’t tell you about this instrument is
because remember huh you remember our illustration with this you know they
want you to make you know all this crazy they want you to actually pay right
where to go I’m trying to give you guys the
illustration again they want you to pay a hundred percent right they want you to
pay this amount interest they don’t want you to save interest it’s not that’s not
their interests right that that’s funny that’s not their interest right there
that’s that’s not what they’re after they want you guys to make ton of
interest payment so they can make money even though the interest rate is gonna
be variable and and it’s gonna be higher than a mortgage why those two things
aren’t gonna matter as much and it’s actually gonna save you more money this
way okay I want to show you I know it’s a little backwards and it could be
confusing I’m gonna show you guys number one the distinction between a mortgage
versus a HELOC here we go so lowest mortgage versus a HELOC first of all key
locks are open are open-ended and your mortgage your mortgage broker slash
banker will know this open-ended and this is gonna be closed ended what that
means is let’s say for example you make a payment of thousand dollars to the
banks I’m gonna draw the best bank as possible there you go right that money
cannot be on a mortgage situation you can’t use that again right you can’t use
it okay but on a HELOC you make the thousand dollar you made a thousand
dollars on the HELOC principle payment you’re gonna be able to use that
thousand dollars again does that make sense guys so it look it works just like
a credit card credit card you have a limit and a home the whole nine yards
here in the mortgage you’re not you’re kind of stuck right you pay the thousand
dollars that’s it it goes to the principal and interest the end on the
HELOC you use thousand dollars you pay it off again you use five hundred
dollars pay it off right just like a credit card now the next thing the
distinction is that he locks the the the interest is calculated and applied on
average daily balance and what that means is that every day so Monday let’s
say you have a hundred dollar balance on Tuesday
you have $90 balance and on Thursday let’s say you have $50 balance right so
each day you bring down the daily balance so well your interest go down
someone who’s really quick show you guys how the average daily balance works
let’s say you have a hundred dollars just like the Monday’s example all right
it’s gonna be multiplied by the interest rate so point zero seven get it and it’s
gonna be divided by 360 days it’s the commercial lending year and whatever
that is is gonna be the average daily interest right and that’s gonna get
applied every single day as long as you have hundred dollar balance so let’s say
from Wednesday through Friday you have hundred dollar balance from Wednesday
through Wednesday through Friday whatever this amount is getting applied
each day but let’s say from Wednesday to Wednesday you had 100 bucks balance on
Thursday you have 90 dollar balance well guess what guys the next day this is not
gonna be hundred bucks this is gonna be ninety dollars so on Monday or I’m sorry
Wednesday you may have had let’s say I’m trying to calculate here let’s say five
dollar interest well the next day because the balance is lower Thursday
not Tuesday we’re going backwards here Thursday you may have more like a third
for dollar interest so you see how the balance on a HELOC every day it matters
okay the longer you have lower balance the longer you’ll have smaller amount of
interest going out okay so this is the key this is one other key a second
pillar so you know you can call it that to understanding why he laughs are
better okay so let’s go ahead and show you guys the actual strategy this is my
last sheet of paper so I better do a good job all right so what we’re doing
is there’s really two ways to skin a cat here okay there’s two ways to do this
strategy I’m gonna show you guys one way okay like I mentioned earlier I’m gonna
show you guys the full illustration of this method and in a link that I’m going
to put down below at the end of this video so let’s say back to the example
$100,000 mortgage $100,000 balance okay this is a mortgage okay what we’re doing is we’re gonna go
ahead and open up a home equity line of credit so obviously this is gonna
require a little bit of equity to have so let’s say we have we were able to
raise or I should say and open a twenty five thousand dollar limit HELOC so what
we’re doing here is some people might say we just got another twenty five
thousand dollar loan that is not the case here guys so if you have this is
like getting a twenty five thousand dollar credit card we didn’t get any
more alone so what we’re doing is we’re taking that twenty five thousand dollar
credit credit line that we have with the HELOC and we’re making a principal
payment principal payment of $25,000 so now our ending balance is gonna be
seventy five thousand dollar balance here and this is gonna be a twenty-five
thousand dollar balance so seventy five thousand plus twenty five thousand we
still have hundred thousand dollar dollar balance in terms of debt okay we
don’t we didn’t incur any more debt all right a lot of a lot of people seem to
confuse that HELOC they think it’s another mortgage or equity loan product
it’s not okay so we we take in the principal balance and and and put it
here does that make sense and what we’re gonna do here from now is we’re still
going to continue to make our mobile payment every single month okay we can’t
forget that all right unless we want a foreclosure which we don’t want what
we’re doing here is that we’re gonna take our entire income okay so you guys
think I’m gonna be crazy here let’s see our we have our income our monthly
income is five thousand dollar income and make a principal payment against the
HELOC so our balance now is twenty thousand dollar balance and we still have a $75,000 balance here
does that make sense but here’s a trick guys out of this twenty twenty thousand
dollar balance we still have expenses every month
don’t wait right we have kids we gotta pay for diapers right we have to pay for
groceries so what we’re doing is we’re paying you know groceries here right
groceries we’re paying for kids expense all right we’re paying we’re still
paying our mortgages when we our mortgage monthly monthly mortgage right
we’re paying for other bills but we know that this all of this is not gonna
happen like right away next day so remember our average daily interest
balance concept right we’re not gonna go and deposit five thousand dollars on
Monday and next day on Tuesday we’re not gonna incur forty five forty five
hundred dollars of of expenses it’s gonna happen you know it’s gonna spread
out right it’s gonna be hundred dollars here 105 hundred dollars there $700 next
week so between I’m gonna do my best to explain this part here so week one we
have let’s say we spent five hundred dollars on groceries that means we have
a new balance of twenty thousand five hundred dollars on HELOC right but our
total balance is twenty thousand five hundred plus seventy five thousand
balance that comes to ninety five five hundred total debt does that make sense
now guess what guys using it knowing what we know about average daily balance
we’re getting up our interest is getting applied on twenty thousand five hundred
dollars not twenty five thousand dollars of an imbalance so even if we do have
I’d say a seven percent Interest okay which is usually he laps are higher than
mortgage interest that 7% interest is now getting applied to twenty thousand
five hundred dollars instead of twenty five thousand dollar balance so if this
was a mortgage balance of ninety five thousand five hundred
we just saved a whole crap ton of interest around right right there Plus
that $20,000 principle payment we did or $25,000 principle payment we did on the
mortgage we not only we saved interest there but we also saved like close to
man had to say about five to seven years on that single $25,000 payment
probably be more I might be even be confident to say 10 years we just saved
10 years of that mortgage the mortgage does that make sense guys say in week 2
we spent additional $2,000 on whatever expenses you may have you know groceries
kids you know they all add up right so at the end the total balance now
including the mortgage balance and the HELOC balance is give me ninety seven
thousand and five hundred dollars so essentially our he life is now becoming
a checking account right nothing has changed right we’re still making the
same expense the same income now the one thing that I forgot to mention is that
you do need to have leftover money at the end to have the HELOC balance come
down as well they know the principal balance of the HELOC right in other
cases that you should not be spending more money than what you’re making so if
you are if the expenses it let’s say is $4,500
that $500 is what’s bringing down the balance so over time that HELOC balance
is gonna come down zero all right it’s gonna come back to zero the balance and
but again we still have that limit we’re gonna take another $25,000 and bring
that $75,000 let’s say you know over time we’re gonna have balance come down
in $60,000 anyways because we’ve been making that mortgage payment right over
time so by now you know what by the time this becomes zero right this would have
come down as well to $60,000 so now if you take another $25,000
principle payment against the mortgage we’re gonna be back down to $35,000 you
guys see that’s gonna probably chop off another ten years does that make sense
guys right you can you guys see how quickly we can pay off your mortgage
using things to the average day balance right and we’re chopping this down way
way way quicker so we’re doing is this is interphase
shit and converting it to what’s efficient you can save so much money
more money on this side then letting it sit on a schedule and having it pay
every single month now some people will argue with me and saying Sam why don’t
we just take the extra money that you you have you know in this case five
hundred dollars and just make an extra payment on that mortgage well guys that
defeats the purpose of having lower lower average daily balance in this case
when we brought the five when we introduced the idea of $5,000 income
principle payments against the HELOC we brought the average daily balance from
balance from twenty five thousand to twenty thousand right and like I
mentioned you’re not gonna be spending up that forty five hundred dollars worth
expenses the next day right you can be spending hundred dollars here one
hundred five hundred dollars there two thousand dollars you know next week so
between those spending you’re saving that interest just like our earlier
micro example Wednesday into Thursday between those two you know between your
spendings that’s where you’re gonna save the interest right we’re cutting the
mortgage balance from back end instead of front end if that makes sense
so guys if you guys need an actual illustration I do have another link I’m
gonna put it down below right underneath underneath the video if you need a
real-life example if you need real figures I have actually made a longer
video about 30 minutes with actual spreadsheets
I made an actual example with real interest rate current market rate I’m
going to show you how the strategy actually works on an excel sheet the
math does not lie my numbers don’t lie I’m gonna show you in an Excel
spreadsheet how this strategy actually works in number sense I know I explained
it in a very conceptual way you know I’ve made a really quick diagram but if
you guys are like like me and you’re a numbers person you’re very analytical if
you guys want to actually see the real number behind this you know this this
concept I’m going to show you it’s called chop my mortgage calm so I’m
gonna write this sooner there you go I’m running out of papers
so I’m gonna write it right here so go to a chop
Oh chop my mortgage.com go to that link guys have emojis calm I’m gonna also put
it you know underneath this video you can also look in the link description
box if you’re watching this on YouTube I’m gonna give you guys real live
illustration also because I’m a real estate investor I want to show you guys
how to use this strategy also on rental properties so you guys can pay off your
rental properties and I will also show you guys on ideas on how to take this
HELOC strategy the velocity banking strategy and turn it into an income
strategy isn’t that cool so what you thought was it was a strategy to pay off
your mortgage quicker I’m gonna also show you guys how to use the this this
method here to also increase your monthly income so if you guys are
interested in in saving your same your time on your mortgage payment if you
guys are interested in you know paying 66% less on interest you guys are
interested in possibly and potentially doubling your income using this strategy
go to chapman mortgage comm i’m going to show you guys some real-life examples
plus i’m gonna give you guys an opportunity to interact with me on a
phone or skype and you know we could chat on how you can take this this
illustration this concept and apply and you’re in your own life so go to chop my
moves calm i will see you guys there i will be waiting and and i’ll see you in
the next video alright take care now

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About the Author: Oren Garnes

40 Comments

  1. THIS IS THE OLDER VERSION OF OUR VIDEO!!! HERE IS THE NEW VERSION: https://youtu.be/3f-ebCjeH8o

  2. So basically begin to use your HELOC like a prepaid credit card per se!! This is really smart as hell!! Honestly, a mortgage is the bulk of your bills👍🏽

  3. How do you qualify for a HELOC if hypothetically you want to buy a $500,000.00 property with say $100,000.00 down? Typically a buyer would apply for a mortgage for $400,000.00.

  4. As im sure ur aware that the word MORTGAGE is derived from the french and translates as DEATH CONTRACT. What do this tell you? Rich/San Jose

  5. What happens if you decide not to spend any money from your Heloc Account. For example, if you just decide to leave the $25k on your Heloc without using it to pay for any necessities?

  6. Thats not going to work. You borrowed 25K at a higher rate, to pay off a debt at a lower rate. Then you magically pulled 5K out of the air and reduced the 25K debt to 20K debt. Then you BS'd us about the kids and the groceries, which has nothing to do with any of this, and Viola! You came up with a bunch of BS. If you just put as much as you can into your mortgage, the interest drops accordingly and the principle paid goes up. Plus the mortgage is tax deductible. I don't think a HELOC is tax deductible.

  7. Velocity of money and debt roll up is a more effective way of paying off your mortgage. Having a HELOC is adding more debt and the variable interest rate could mean a substantial increase in payment. The idea is to roll over debt into a cash account earning interest and using that investment as a way of paying off your mortgage, all a while, continuing to make the same payments into the new investment account. Nice concept guys, but very impractical and not suitable for many individuals.

  8. You can't pay shit this way! If you guys think the financial companies are stupid and they will let you take advantage, you don't understand the life in America…Because of people like these 2 brothers and your stupidity the property market will be crash once again…

  9. Higher risk higher return. This will work if you can stick with paying higher monthly payment (mortgage+heloc) and do not factoring in lose of income risk.

  10. Its a cool idea.
    Simply reducing the amount time money is exposed to interest.
    The most complex part is the fact that the Heloc is likely double the interest of the fixed rate mortgage.
    The player will need to craft an income and expense schedule to minimize time exposure enough to offset the increase in yearly APR. Many lenders now offer payment date adjustment to assist.
    If done incorrectly though, the player pays more interest.
    Done right, the player pays less interest.
    There are similar game strategies with 0% credit cards

    Money is a game. One of many things parents need to teach their children.

  11. I'm trying to follow along with your logic here but it's extremely flawed… If the person has a $5,000 income and they put 100% of that towards their HELOC, then NO, their mortgage isn't just "automatically paid". You do not address that whatsoever in this video and it seems like you're a snake oil salesman… I don't think you are, I just think when you are assuming that $2-3000 dollars for a mortgage payment comes OUT OF THIN AIR when the person ALREADY USED ALL of their income to their HELOC.. That's BEYOND DISINGENUOUS. Please clarify. 🤔🤷🏾‍♂️

  12. If you just throw a additional four hundred dollars a month towards principal only you will pay your mortgage off quickly! I throw all my spending money on my principal! Before I buy something, I usually choose to throw my spending my towards principal! 20, 30, or even 50 dollars a month brings your principal down! I paid my mortgage off in four years by not purchasing stupid items that I do not need! Be smart! Extra cash just throw on principal and that total will come down fast! Believe me!

  13. pay mortgage in 5 year? oh wow i just paid in one day how? i saved 100,000 interest over 15 years by paying in one day. just paid full when i bought property.

  14. What about QUALIFICATION.
    7 C OF CREDIT.
    all b20 rules to control HIS MISTAKES .
    mortgages suck ? Get out of the Industry noob

  15. HELOC PUTS YOU IN REVERSE AT INTEREST PAYMENTS AND THEN YOU PAY BANK FULL LOAN IF CALLED IN BECAUSE OF JOB CHANGE DIVIRCE DEATH ETC…….. SO RISKY.

  16. By 15:05 he runs outa paper and says to skin a cat twice . ? 100 000 mortgage for a Senior with 300,000 in EQUITY. but you know this deal will be REJECTED. WHATS THE FLOATING HELIC IRATE – 20% ?
    – no credit check just take their EQUITY.
    ARE YOU A SHEISTER ?
    YOUR CONFUSING lol.
    No you dont make sense.

  17. Income 5000 ( 7000 ? ) so easy to write but not in reality.
    – your FAIL.
    – JOB FAILS they owe 100,000 .
    And LOST 100,000 IN EQUITY.
    BETTER BE WORTH IT.
    spent 100,000 in 1 year !!!!
    – idiot.

  18. I like it. That’s why on my first purchase of my place, lender ask me to close my line of credit.($66,500 with 4%) this would be a good strategy next time.. 4% simple interest is less than 2.9% compounding.
    A good strategy only if you know what you’re doing and stick on the plan..;)

  19. Hey can you please help me?? I saw one of your videos last year or around that time, with the excel spreadsheets and you actually showed the numbers but I can't find that video again on YouTube? Is it unlisted or did you delete it? PLEASE HELP

  20. Two payments = two liens on home, a first and second mortgage. two different rates , ones adjustable most of the time, credit utilization is high due to a instant 25k back on the heloc, gets worse before it gets better. might work for some

  21. good video but we do not get $5000 as a monthly payment rather get biweekly payment of say $2500 so will not that make a difference to the whole concept? I mean th amount saved will be less on the interest on HELOC. Also, do you get a card for HELOC because if you do not get the card the how would one use it as a payment for groceries, coffee, etc? trying to get cash every time from the HELOC account is a big hassle.

  22. Yes you could! I just always threw all additional funds on the back end and paid first first house off in seven years and second off in four! So, whatever works is good but my way seemed to work like a charm! You are correct though!

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