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How to Pay Off your Mortgage in 5 Years

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25:37   |   Sep 13, 2017

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  • 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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THIS IS OUR OLD VERSION...WATCH THE NEW VERSION HERE: /watch?v=3f-ebCjeH8o

Check out the SEQUEL Video on how to use this strategy to CREATE Passive Income: /watch?v=lq5ag71CbJM

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Ever wonder how you may be able to pay off your within 5-7 years (depending on your situation) without adding a single penny to your payment and not ? Sam Kwak is going to show you a strategy in how you can use a different method/instrument to pay off your mortgage quicker! This strategy is called the "Debt Free Acceleration" Strategy. This strategy has many other names such as "Velocity Banking", "Mortgage Acceleration", "Accelerated Debt Reduction", "HELOC Strategy", and more!

We first need to understand how mortgages work. In this strategy, we are using a Home Equity Line of Credit (HELOC) as a leverage to pay off the mortgage quicker and still maintaining our income and expenses as how they are. You can also use other instruments such as Business Line of Credit, Personal Line of Credit, or Credit Cards for the purpose of this strategy. The beautiful thing about this strategy is that it allows us to take an inefficient debt and convert it over to a much efficient debt.

The emphasis on this strategy is mainly on cash flow and principal balance reduction. The adage strategy of taking your hard earned money you earn and paying extra toward the principle is an old school strategy. While it works, the Debt Free Accelerator Strategy is a much more efficient way of paying off an amortized debt. This strategy will also work on Student loans, car loans, personal loans and so forth! Don't let the banks trick you with their amortized products!!!

WATCH THE NEW VERSION HERE: /watch?v=3f-ebCjeH8o
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DISCLAIMER: Sam Kwak is not a licensed mortgage broker, not real estate agent, not a Certified Financial Planner, not a licensed attorney, and not a Certified Public Accountant. Viewers will consult with their professionals prior to engaging in any financial strategies. Not everyone will experience 100% success rate with using this strategy. This strategy does require equity, a good standing with your current mortgage and the patience to use the strategy. The result of paying off your mortgage within 5-7 years is atypical but it represents a likely possible outcome for individuals who use this strategy. We (Novo Elite and DBA The Kwak Brothers) does not warrant a promise or a guarantee any specific outcomes and/or results from the use of this strategy.