George Kamel - This Mortgage Hack Actually Works! (Here's Why)

Episode Date: March 29, 2024

💵 Sign up for EveryDollar today. Create a free budget!   There’s a trending mortgage hack floating around the interwebs claiming to save you hundreds of thousands in interest and shave years off your payoff timeline. In this video, you’ll learn how it works and why it’s ultimately not the strategy I personally used to pay off my mortgage early.   Next Steps  📗 Order George Kamel’s new book, Breaking Free From Broke.  💸 Watch to find out if refinancing is right for you.     Offers From Today's Sponsors  Better Help: 10% off your first month of therapy! https://www.betterhelp.com/george  🎙️ The Ramsey Show    🍸 Smart Money Happy Hour  💡 The Rachel Cruze Show  💸 The Ramsey Show Highlights  🧠 The Dr. John Delony Show  💼 The Ken Coleman Show  📈 The EntreLeadership Podcast Ramsey Solutions Privacy Policy  Learn more about your ad choices. Visit megaphone.fm/adchoices

What's up, guys, George Camel here. And I want to look at something that's getting a lot of attention right now. Why can I keep my fingers up your baby, won't you? Nah, nah. No, not that at all. I'm talking about the mortgage hack claiming to save you potentially hundreds of thousands in interest and shave years off of your payoff timeline. And today, I want to explain how it works and why ultimately is not the strategy I personally used to pay off my mortgage early.

That's right. Not for me. Like cauliflower steaks. Where's the beef? There's no beef. Okay? It's just a vegetable that you sliced and put on a grill. Don't call it a steak. That's my food's food. And I don't appreciate you eating that.

But first, let's give some attention to those like and subscribe buttons so they don't get too jealous. And while you're at it, be sure to share this video with your friends who abuse the true purpose of cauliflower, which is to remain uneaten on veggie trays. Just call it what it is, okay guys. It's albino broccoli and I don't like it. I don't trust it. making pizza crusts out of this stuff now. We've lost our minds. This has to stop. Okay, before we get to this mortgage hack, let's talk about why you'd want to pay off your home early in the first place.

Not only is there huge freedom in being totally debt-free and living large in a paid-for house, but get this, when you pay off your home early, you free up more of your money that you can use to build even more wealth. I mean, think about it. Let's say you've got a 30-year mortgage with the average monthly payment of $1,775. That's average. But let's say you really got in there and got aggressive and you paid it off in 15 years. Well, then you'd have an extra $1,775 each month. And you could do a lot of stuff with that money. Hire an MMA coach, take your kids kindergarten class to Six Flags over Georgia, or more importantly, and less fun, invest in your future. Because after 15 years of investing that $1,775, it would grow to over $700,000, assuming a 10% average rate of return. So because you

pay it off your home early, not only did you save a ton of money on interest, but you have a paid-for house and a sweet nest egg to show for it. You see why I'm such a fan of paying off your mortgage early? Yes, master. Now, this is where our pal Jeremy from at Personal Finance Club comes into play. Now, he's not actually my pal, but Jeremy, I would love to be friends. Reach out to you, boy. Now, recently, Jeremy posted this great little number that got a lot of attention on Instagram.

So basically, here's what's going on. We've got Will and Whitney. They both take out the same mortgage, $300,000 with an 8% interest rate. So Will makes the scheduled normal payment of $2,200 a month. Whitney, on the other hand, makes an $1,100 payment every two weeks. And you might think, well, it's kind of the same thing, but it's not. That's not how weeks and months work. Very strange.

So here's the result. Will ends up paying off his 30-year mortgage in 30 years, and he ends up paying $492,000 in interest. Whitney, on the other hand, who made a half a payment every two weeks, paid off the mortgage seven years early and saved 137,000 in interest. So she ended up paying off her mortgage in 23 years instead of 30 and saved a whole lot of money in interest. How did that happen? So basically what's going on here is that our girl Whitney is making biweekly mortgage payments

instead of a monthly payment. This is classic Whitney behavior. And as someone married to a Whitney, I got to say, Whitney's tend to make good choices. She married this guy. It's too cute. It's disgusting. Doing some quick math, that means she's signing up for 26 half-size payments a year, which ends up being 13 full-size payments a year.

So because Whitney went the bi-weekly route, she's essentially sending in one extra mortgage payment every year without hardly feeling the difference. And as time marches on, this allows her to pay off her home seven years early saving her six figures in interest. I mean, who wouldn't want to become completely debt-free, six, seven, or eight years sooner than scheduled, and save a metric butt ton on interest?

I want that. So our friend Jeremy at Personal Finance Club is totally right. This actually works, and it's a decent hack. But really what you're doing is just tricking yourself into paying an extra $190 each month. Adding one extra full payment, say, every December, would accomplish the exact same thing. Plus, as the old elf adage goes, the best way to spread Christmas cheer is sending more money to the bank. That's the saying I found on Google. You sit on a throne of lies.

Now, don't get me wrong, I'm all for making biweekly payments if it helps jumpstart your money. mortgage payoff, but the risk here is that this becomes a set it and forget it mindset that causes you to keep your mortgage around longer than you have to. Because every homeowner knows there are two things you don't want hanging around too long, your mortgage and stray cats. Scram mittens get! This is ultimately why I didn't use the bi-weekly payment method to pay off my home early. But before I share how to pay off your home even faster, I want to ask you a question, what do you really care about in life? Is it this YouTube channel? Is it something else? You know, most of us we get so busy, we never really figure out how to make the most of our potential.

And if that sounds like you, I've got news for you. Therapy can help you focus on what really matters. And that's why I'm happy to share that this episode is sponsored by BetterHelp. Their online therapy helps you set boundaries with your time and relationships so that you spend your life doing things you actually care about. And to get started with BetterHelp, it's super easy. You answer a few questions, you get matched with licensed therapist, and you can switch therapists at any time for no additional charge. So learn to make time for what makes you happy, with BetterHelp. Just visit BetterHelp.com slash George today to get 10% off your first month. That's BetterHelp, H-E-L-P.com slash George.

Okay, back to paying off your mortgage even faster. What Whitney and I did, my actual wife, not the flight attendant emoji, as featured earlier, who I'm sure is a wonderful woman, was to take a look at how much interest we would end up paying if we made the prescribed payments on our 15-year fixed-rate mortgage, which amounted to almost $50,000 in interest alone. And surprise, surprise, giving an extra $15,000. of our hard-earned money to the bank wasn't exactly something that put a pep in our step. So we got super intense about paying off our home early.

And by intense, I'm talking uncut gems intense. But, you know, without all the addiction and gambling and murder and stuff. Uncut jobs. Right. We made it a goal to always try to pay more on our mortgage than we did the month before. So if we did an extra $200 in March, we tried to do $300 in April and so on. And this challenge motivated us to keep cutting gems from our budget. So moral of the story, after 26 months, we paid off the home and ended up paying less than $10,000 in total interest.

$9,396 to be exact. Talk about a heck of a mortgage hack. How about that one? You are a nerd. But let's go back to our favorite digital flight attendant, Whitney. What if she did more than just pay an extra $190 a month toward that mortgage? What if she doubled that to $3.80 every month? Well, her time saved would go from 7 to 11 years.

and the amount she'd save an interest would go from $137k to over $212,000 in interest saved. And even if she just made an extra payment once a quarter, she would pay off her house nearly 15 years early. Now listen, my hips don't lie, I neither do these numbers. You can do the unthinkable and get a mortgage out of your life forever. And if you want to see for yourself, check out our free mortgage payoff calculator and play around with the numbers and see how much time and money you'd save by making extra house payments every single month. But before you get too excited and put on your Avichy mix and start throwing around extra mortgage payments like glowsticks, let's go over some ground rules here. Number one, you need to check with your mortgage company because some only accept extra payments at specific times or charge prepayment penalties.

Lame, I know. And that's rare, to be fair. Number two, when you do start making extra payments, you want to make sure it's applied to the principal balance, not to interest or the following month's payment. And number three, don't get sucked into paying for some fancy schmancy mortgage accelerator program. With focus and intentionality, you can accelerate your own mortgage all by yourself. I know. A lot of you are thinking, George, this sounds great and dandy. Would love to pay off my mortgage, but I don't have extra money laying around like some fat cat.

All I've got is a mittens, the stray, who's been in heat since Tuesday. And why won't she stop the screaming? Well, if you actually, you know, make a budget, you can easily find some areas to cut back on and even more ways to make money to speed up your progress. And hey, if you're really in it to win it, here's another little hack for you. You could refinance. Refinancing can help lower your monthly payment and shorten your loan term so that you can reach your goals faster. Now, with rates where they are right now, there's a lot to consider here, and it may not be the best option.

So make sure to check out this video where I help you figure out if it's the right move for you. As always, hit that like and subscribe button and share this video with the Whitney you love in your life. I'll make sure to share it with the Whitney I love in my book. Thanks for watching. We'll see you next time.