Banks Will Never Tell You This: Mortgage Payments
The banks will never tell you this, but did you know that you can pay off your 30-year mortgage in 25 years or 27 years, or even 21 years and save thousands and thousands and thousands of dollars? Yes, that’s true. Bank will not tell you this. Remember, banks are in it to make profit. So if they can charge you 3% interest rate or 7% interest rate, they will do that and they don’t want you to pay off earlier. I’m going to show you exactly step-by-step what to do without spending a lot of money. And I know you might have heard that if you pay extra principal payments, a certain amount you’ll save. But in this video, I’m going to show you a very minimal effort on your part on monthly payments and you can cut off five years or $100,000 or $50,000 off your mortgage payments. So let’s get right into it. Let me give you a specific example. Before I show you how to make those payments, I wanted to give you some numbers so that you understand how much interest income the banks make on the home that you buy, whether it’s your home or your rental property. So let’s assume you have a house with a loan of $200,000 and at 3% interest rate for 30-year fixed.
Did you know that your total interest payments with your house will add up to $303,000 and $500? In other words, on a 200,000 loan at 3%, the banks will make $103,000 just on interest payments. But let’s look at it this way. Let’s say you went to the bank and today that same house cost you $200,000 loan amount, but the rate is 7% and not 3%. So on the house that you had 3% interest rate, you paid $103,000 just on interest over the life of the loan, which is 30-year fixed rate. But on this house, at 7%, you will be paying $280,000 just in interest, plus the $200,000 of your principal. In other words, the $200,000 house at 7%, and if you keep it for 30 years, costs you $580,000. That’s why it is important for you to know how to save money, even if it’s cutting off $50,000 or $10,000 over the life of the loan. So let me show you. So, before I start showing you the trick or how to make the extra payments, there are eight other ways or eight to ten other ways, I’m going to show you how you can make bimonthly payments with minimum effort. And you can knock off up to five years, or up to $100,000 and $200,000, depending on the amount of your loan.
So how do bimonthly payments work? Well, usually you pay once a month, whether on the first or the 15th, or the 30th. And let’s say you’re paying $1,000 just to let you know how this system works. So if you’re paying $1,000 a month on the first or the 30th now what you do is instead of paying $1,000 a month, you pay $500 on the first and $500 on the 15th. In other words, every two weeks you pay the $500 payment. So it’s not a lot of effort. The way it ends up is you will end up making 26 payments this way instead of the twelve payments. So in other words, you will be making two extra payments per year. And by doing that you can knock off a lot of time and lot of interest. So let me give you a specific example so you can understand what I’m talking about because I’m throwing a lot of numbers at you and I appreciate you watching. So please stick around with me. And also by the way, at the end of this video, I mentioned to you that there are eight to ten other ways to pay off the mortgage. In fact, I did a video a couple of months ago and I’m getting a lot of views on it. So if you want to look at that video, I will put a link at the end of this video. It shows you eight specific ways you can save money and you pick and choose the one you want. So the link will be at the end of the video. It’s called “No More Mortgage.” So let me give an example. Let’s take a loan amount of $200,000 at 4% interest rate for 30-year fixed payment. So if you do that, your monthly payment comes out at $954 a month.
Now, if you make twelve payments a year of $954, that’s well and done. But let’s say you want to cut off the payments. You don’t want the bank to get rich based on your part. You want to save money as well. So if you start making biweekly payments, which means if you start making $440 biweekly payments, maybe every first and every 15th or every other Friday or every other Monday, you will be making $440 payments because you cut the payment amount in two and start paying those every two weeks, every two Fridays, every two Wednesdays, whenever, but on a consistent basis. And you can look at this chart to see this example. So in the above scenario, a borrower who uses accelerated biweekly payments will find that the loan is repaid in 310 months and not 360 months and that you will save $22,553 in interest just for paying biweekly. In other words, you end up paying two extra payments a year, which hopefully is not a lot. Imagine if you had $400,000 in loan payments or $800,000 in loan payments. You could have saved $80,000 to $100,000 in just interest by making one or two extra payments a year if you do buy monthly payments. So this system goes a long way and you may wonder how does this system works. Well, what’s happening is several things.
Number one, you are accelerating the payments. That means instead of paying every 30th of the month, let’s say example, you are paying $1,000. Now, you’re paying $500 on the first and $500 on the 15th. So what happens is every time you make the payments, that $500 that you paid on the first, which you are going to pay on the 30th, you save the 30 days of interest that month. But imagine that happens over 30 years. So every time you make a payment, you’re saving interest on that. At the same time every year, you’re making two extra payments of $1,000 every month. So over the time of 20 years or 30 years, you’ve paid a lot of principal. So you are accelerating your principal payments at the same time you reduce your interest payments. So that’s how you save a lot of time on your mortgage payment and you cut off a lot of interest rate, as I showed you in this example. Now, another very simple way of paying off your mortgage, if you don’t want to pay biweekly payments, in other words, you have to make those biweekly payments because you don’t want to get behind. But let’s say you decide, you know what, I want to pay extra payments when I can. Or let’s say you paid two extra payments a year. So I want to let you know that, first of all, I’m not a lender. So if you have any specific questions, ask your lender or ask your realtor and he’ll refer you to a lender.
And the other thing you want to consider is make sure that before you start a program of a bimonthly payment or you’re making extra payments or making extra lump sum payments, you may want to ask the bank or the lender if they allow that. Because some banks, most of them allow it, but some banks don’t like that you make bimonthly payments or biweekly payments. They don’t like that you pay extra lump sum payments, so they will charge you extra fees. And some banks may not even allow that. And at the same time, depending on the amount of lump sum payments you’re going to make. Let’s say you got a tax refund, or you won a lottery, or you inherited some money, or you got a bonus from your work or you made extra commissions or you work part-time and you came up with $10,000, $20,000 to $30,000 that you want to pay off to reduce your payment and reduce your principal payment. In this case, if a lot of the banks, they have a pre-payment penalty, some charge you if you pay off a certain amount, then they charge you up to three years or up to five years.
So little things like that just make a simple call or go to your bank and just check it before you start that. But overall, like I said, there’s eight ways to save at least eight or more. One of them is making biweekly payments. You can make extra $100 a month payment or extra $400 a month payment, or you can make lump sum payments. And there’s other ways to do it, but I highly recommend that you start paying extra. Ever since I bought my house, and I learned this 20 years ago, I make extra payments on my car payments, $10 a month, $20 a month. And I save two or three extra payments over the life of the loan. And I’ve been doing this on the house as well. I always pay $100, $200 extra on a regular basis, automatically. So if my mortgage payment was $2,600 a month to start with, I automatically start $2,800 a month from the get-go, and I put it automatically. So it’s done and done and done. And sometimes, if I have extra money not that I have extra money a lot of times, like most of us, but if I do have extra money and I try to pay off, but I let the bank know that the extra money goes towards your principal. So thanks for watching. Please watch this video. No more mortgage.