Real Estate Tricks: How To Pay Off Your Home Mortgage FAST

What's up you guys? It's Graham here. So here's a really popular topic of discussion when it comes to real estate, and that is how to pay off your mortgage early. With this video, I will tell you exactly how to do this with ninja real estate secrets and tricks I've learned along the way. Not to clickbait or just throwing this out there, but I actually practice many of these techniques myself. One of these ways is about to save me more than two hundred dollars per month on my mortgage payment with really just a few hours' worth of work. I'll show you exactly how to smash that like button if you haven't done that already. So with that said, let's get in the video.

Now first, when it comes to doing this, I think it's really important we address the comments I've received far too often that really need to be talked about. That is the concept of paying down your mortgage early with a HELOC. I've never really understood why anyone would do this or how this would even be a topic of discussion. But once I started digging deeper, I realized that this method is frequently published and emphasized by people who don't understand math, as well as banks who just have a financial interest in you spending more money with them. So they make it sound way better than it actually is.

Let's go over exactly what a HELOC is, how you can pay down your mortgage early with this, and why you should also never do this in like 99.999% of situations. Then I will show you how you can actually pay down your mortgage early in four ways that are actually proven to work because science.

So first, what is a HELOC? This just basically stands for a home equity line of credit. This is pretty much just using your home like a bank account where you borrow money against the value of your home, and then you only need to pay back what you actually end up using. This functions similar to a credit card, where you only pay interest on the amount of money that you actually use.

With a HELOC, you typically only pay interest for a certain timeframe. Then when that time frame is up, you enter what's called a repayment period, where you'll then pay principal and interest until your full balance is paid off. Full balance paid off in full — like I guess that works. In many situations, a home equity line of credit can be awesome. Like if you ever need cash for an investment but you don't want to refinance your entire mortgage, a home equity line of credit is actually really, really useful. People also use a home equity line of credit to fund a business or pay for a home remodel, but using it to pay down a mortgage, on the other hand, can get a little strange.

So the concept of paying down your mortgage with the HELOC goes a little something like this. And by the way, this is super confusing, so just stay with me here. Because to logical people like you and I, you probably won't get it. But let me at least try.

Let's say that you have a five hundred thousand dollar home, but then you have a two hundred thousand dollar mortgage. This leaves you with three hundred thousand dollars worth of equity that you could then borrow from. Then you open up a HELOC and you borrow a hundred thousand dollars from that credit line. After that, you take that one hundred thousand dollars that you borrowed and you pay down your mortgage with it. Now you still own the five hundred thousand dollar home, but now you have a hundred thousand dollar mortgage instead of two hundred thousand dollars.

Then you have a hundred thousand dollar HELOC payment that you now have. Then you put your entire paycheck towards paying down the HELOC payment as soon as possible. Then you borrow more money from the HELOC if you need it for other expenses. So basically, the HELOC just becomes like a checking account for you to draw from while you're paying it down at the same time. Then once it's paid down, voila! You've saved money on your mortgage interest because you've made a sudden lump payment and paid it down much faster.

Now if you're anything like me, you're left scratching your head thinking that makes absolutely no sense. Why would anyone do this? How can someone do so many mental gymnastics to think this is ever a good idea? Because, I'll tell you, this makes zero sense to me whatsoever.

I did a lot of research on the HELOC method of paying down a mortgage early. Like if you watch my videos, you'll know I will spend hours researching something before even making or planning a video on something like this. Also, many of you know I'm a very open-minded person. I'm cool hearing out different things, but this is straight-up just stupid. It makes absolutely no sense.

So don't feel bad if you're just as confused as I am, because here's why. First of all, a HELOC is generally at a higher interest rate than you'll pay with the traditional mortgage. Like in many cases, it's as though you're paying off a mortgage at 4% by borrowing more money via a HELOC at 5%. Even if you pay off that 4% loan faster, you'll still owe the exact same amount of money. They said now you're paying 5%, which means you're now losing money, which makes absolutely no sense.

Secondly, HELOCs are generally what's called a variable interest rate loan. This means that the interest rate you pay will fluctuate over time. This could actually be higher in the future. Even if you're borrowing money right now at a 4% interest rate, two years from now it could very well be possible this could jump to like six and a half percent. Many times, lenders will offer you very attractive promotional rates to entice borrowers into opening up a HELOC. Usually, that includes a low interest rate for the first 12 to 24 months that might be on par with your mortgage. Then after that, it's going to jump to like five to seven percent if you don't pay it off in full.

This just seems incredibly risky to me. Compare that to a fixed-rate mortgage, which will not fluctuate in price whatsoever. What you pay is what you pay for the lifetime of the loan until it's paid off in full.

Third, with the HELOC, you also have to pay transactional costs, including appraisal fees, transaction fees, processing fees, and title costs. The list goes on. This all needs to be factored into the overall cost of applying for this line of credit. Whether or not this money might just be better spent somewhere else, like actually just paying down your existing mortgage a little more, a little early.

Fourth, one of the main reasons I would absolutely never do this is that the interest you pay on a home equity line of credit is often not a tax deduction if you use that to pay off any existing debt. On the other hand, your mortgage interest is a full tax deduction on the first seven hundred and fifty thousand dollars you borrow.

So with the HELOC, you end up automatically losing that deduction altogether, which in my opinion is really one of the main reasons for buying real estate in the first place. This makes me really scratch my head and think why would anyone ever do this? Like you're trading a low interest fixed-rate loan for a variable rate higher interest loan that's now not tax-deductible, and also with transaction costs. It's straight-up borrowing money on worse terms to pay off money on better terms.

So anytime someone tells you that you can pay off your mortgage faster with a HELOC, you just must understand that there is no such thing as free money. This is not a viable hidden strategy that somehow gets you something for nothing. It's basically just like you're borrowing money from Jim to pay back the money you owe Joe, but you still owe the exact same amount of money at the end of the day.

On the other hand, if you actually want to pay down your mortgage faster and save money, here are the real ways to do it.

The first is what's called a refinance. This is where you go to a bank and they will give you a brand new loan that replaces your previous loan. Now this works best when interest rates go down, and then all of a sudden you can get a lower interest rate if you just get a brand-new loan. This is something I'm actually in the process of doing right now to save some money.

Here's my actual real-world example: I'm currently paying about a four and a half percent interest rate on one of my properties. I actually thought that this was a pretty decent rate at the time. There's nothing wrong with that rate, but rates went down recently. I have the opportunity to refinance that loan and get this — three point eight seven five percent fixed for thirty years. That would save me about two hundred and twenty-something dollars per month in interest on my mortgage.

Now in order to do that, I will need to apply for a brand new mortgage and a brand new bank, pay about three thousand dollars in fees, and then I can get a brand new mortgage for the exact same loan amount. But this time I'm going to be paying about two hundred and twenty dollars per month less on my mortgage. So if you're out there and you realize that you can save money on your mortgage by just refinancing it to a lower interest rate, then do it. Just like always, always do it. This is probably one of the best ways to cut back on your expenses and save some money. That's basically it — 100% guaranteed.

Also, just as a thank you, if you watch it to the very end, I'll share with you a really cool strategy to get an even better rate on your mortgage than any bank will ever publicly advertise. It's worth it. This is a really cool secret real estate trick. Just keep watching it to the end.

Now, the second method to pay down a mortgage early is to make what's called bi-weekly payments. The way your mortgage is calculated is by your total outstanding loan balance. So instead of making one payment per month, you can make half of that payment every other week. As we all know, or I guess we should say as we all should know, there are 52 weeks in the year.

So you'll be able to make 26 bi-weekly mortgage payments every other week. If we just do the math a little bit more, we all know that 26 half payments equals 13 full payments per year instead of doing 12 per year if you had paid monthly. Of course, that just cuts down your loan time substantially. Like as an example, for a $300,000 mortgage, if you just make bi-weekly payments instead of making one payment per month, you'd pay off your mortgage four years earlier and you would save about $33,000 in interest.

That's all for just making half of your payments every other week instead of just doing one payment monthly. So if your goal is to get rid of your mortgage as soon as possible and you don't want to spend any extra money doing so, then absolutely go this route. A two-week difference is nothing just to pay down your mortgage faster, especially when you spread that out over an entire year.

The third way to pay down the mortgage early is just by making extra payments towards your loan. Consider that with a mortgage payment, you're making 12 payments throughout the entire year, every single month. But if you ever get an end-of-the-year bonus or any lump sum check or any sort of tax return, and you throw it all into the mortgage, that could cut down your mortgage time by a lot. Just making two extra mortgage payments per year can cut down your mortgage time by seven years.

So if your goal is just to pay off your mortgage early, then just consider doing this anytime you get an unexpected windfall of cash, like a tax refund or a bonus at work or any sudden promotion or whatever it is — just plug it all back into the mortgage and pay it off early, if that's something that you want to do.

Finally, the number one best way to pay off your mortgage early that everyone's been waiting for is just to pay off your mortgage earlier. There's no other way around it. Like I always recommend refinancing if you can get a lower rate to save the money. You could then make bi-weekly payments to speed up the process even further. But beyond that, you just got to pay it off using your own money by just paying it down sooner.

If your mortgage payment is $1,400 per month for 30 years and you decide to pay $2,000 per month instead, you'll pay off your mortgage 10 years sooner. Up that to $2,200 per month, and you'll pay it off almost 13 years sooner, and you'll save about a hundred thousand dollars in interest over 30 years.

That's pretty much it. If anyone ever tells you that there's any sort of arbitrage that you can use to pay off your mortgage faster, other than those four ways I just described, they're either lying or chances are they just have no idea what they're talking about.

I know it seems like I'm rather opinionated when it comes to this, but I just can't see any reason why you would ever be better off paying down a mortgage early with a HELOC instead of using one of the four methods that I just described that are safe, guaranteed, and also proven.

Of course, for those that stuck around to the end and want to know how they can get banks to give them better rates on their mortgage or if you're going for a refinance, and this is something that banks will never tell you to do, is just to shop your loan around. What you'll do is you go to one bank and get a rate quote. Then you take that to the second bank and ask them to beat it. Trust me, they almost always will. Then you take that new quote and take it to a third bank and ask them to beat that one, and they will.

Then you continue doing that, shopping the loan around each time having them beat each other until all of a sudden, one can't outperform the other. All of a sudden, there you go. You have the lowest interest rate. It's kind of like negotiating the price on a used car because there's plenty of profit margin in these loans. The only way to get the rock-bottom interest rate pricing is just by doing this and shopping the loan around. The process usually takes a few days, but trust me when I say this — these are a few days that are very well spent and will save you a ton of money.

That is the real truthful way on how to pay down your mortgage faster and how to save money. Just remember when I say this, and I only say this because I've made several videos on this before, but just really do the math to determine if this is really the best idea to pay down your mortgage sooner. I usually recommend that if you have a mortgage interest rate right now under four and a half percent, it's usually better just to refinance it to a lower rate and then pay it off over time, write off the interest, and then just invest the difference.

If you have an interest rate under like 3.75 percent, then it's almost always better just to go and invest the difference to get a higher return elsewhere and just keep the loan. But again, to each their own. I just present my points and my opinion, and then I share my math. It's always up to you to make your own decision with what you feel is best for you.

So with that said, you guys, thank you so much for watching. I really appreciate it. By the way, I just want to mention that I do have a private Facebook group in the description for anyone who's interested in real estate, real estate investing, real estate agency, real estate wholesaling, anything real estate. The link to that is in the description. The best part about all that is that it's totally free. All you got to do is just go and click the link and join that group. I think we have over 17,000 members right now in that group, so it's a really cool community. Feel free to go ahead and join it.

Also, if you made it to the very end, and you haven't already smashed that like button, make sure to go ahead and gently tap that like button. Then tap the subscribe button if you're not already subscribed. Tap the notification bell if you haven't done that already. And then finally, there are also many plugs in this video. Add me on Instagram. I post there pretty much daily, so if you want to, feel free to be a part of that. Just feel free to be a part of that.

Add me on Instagram. Thank you again for watching, and until next time!