How to pay off a Mortgage in 7 years
This post will be a short one because I am going to send you over to some video resources and a work sheet that you can use (or offer to your clients)
THE SECRET MORTGAGE TRICK YOUR LOAN OFFICER WONT TELL YOU
Over the years as I have been sharing this concept, its amazing to me how many people do know about it it, but how few actually implement it.
It sort of reminds me why so many people end up struggling financially… Usually it’s not because the information isn’t out there, but that they just don’t take advantage of what is available to them.
This system although free, will take some time, effort and discipline to make it work for you.. We do use this for our own mortgages but, it also has great uses as a “lead generation tool” or “conversation starter” with other investors and/or home owners/past clients etc.
Because it is free, most people just dismiss it and don’t take it seriously… But for those of you that do it can save you A TON OF MONEY
The Fundamental Concept… VELOCITY MORTGAGE
Simple Interest VS Compound Interest
The Foundation of this concept is how interest is calculated.
As you may or may not know… Most of the interest that you pay when you have a mortgage is payed at the “beginning of loan” Looking at the chart above, you can see that a HUGE percentage of the payment is in interest for the first 222 months of a loan (A typical loan is 30 years or 360 months).
But what if a portion of the loan was simple interest? What if instead of all the interest being “compounded” at the front of the loan… What if it was a simple interest loan?
This is the foundational concept of the “velocity” mortgage.
We want to switch as much of that loan balance from Compound interest to Simple Interest… And to do it as quickly as possible.
Let me give you some rough numbers to think about… And then you can go over and get the actual spreadsheet and figure it out for yourself.
Lets say you had a 100,000 home loan at 4%.
You would have a fixed payment at $506.69 (not including taxes) This would take 30 years to pay off
If you had a INTEREST ONLY LOAN 100,000 at 4%
You would have a “interest only” payment of $333.33
The difference between those to payments is 173.36
IF we took the 173.36 and “PAID DOWN” the principle, the new principle would be 99827.00
The new Principal Balance would be 99827.
Not much of a difference you may think. HOWEVER…. Your entire loan balance has now gone down…
The next month your new loan balance is 99827
your “INTEREST ONLY” payment is 332.76
If you made the full original payment of 506.69
You have now paid 173.93 toward the principle.
Now your principle has gone down to 997,654
And so on and so on until the loan is paid in full much quicker.
To see the actual numbers and how they would work out specifically for you… Check out the spreadsheet and training for yourself… It’s totally free