The BIGG Successs Show
A Better Way to Pay Off Your Mortgage Early
We compare a new program that helps you pay off your mortgage earlier to the traditional way. Find a written summary of today's show at BIGGSUCCESS.COM.
- Welcome to The Big Success Show. Today, we'll talk about a better way to pay off your mortgage early. - The Big Success Show with George and Mary Lynn. - You know Mary Lynn, it seems like every time you turn around, there's a new way to pay off your mortgage really fast, right? Over the years, I've seen a number of them. - We did a show not too long ago talking about, should I pay my mortgage off early? We have a listener. - It's good reasons not to. - Right, ask us, and so there are some criteria to look over, and we've got a link to that article today at bigsuccess.com. - And recently, I've seen a number of solicitations for this new way, this new idea of how to pay off your mortgage early. And the basics of it are you replace your checking, savings, and any other accounts with one home equity line of credit, which you get from your local bank, and then you deposit all your money into that account, all your paychecks, and any other income, and you pay all your bills from that account. And by using this home equity line of credit, you're able to make payments on your mortgage ahead of time. - The benefit is that you can pay off your 30-year mortgage in as little as 10 years. That seems pretty appealing, and you could save a boatload of money and interest. - That's exactly right, Maryland. And the thing is, though, if you have any other debt, you know, credit cards, that obviously probably should go first, car loans, all of those things should probably be out of the way before you even contemplate paying down your mortgage, in most cases. And as we always say, talk to your financial planner about the specifics of your situation. - Now, the particular program that I looked at, one thing I have to say I really liked about it was it was a great visual presentation of exactly when you would have your mortgage paid off. It keeps it right there in front of you at all times. - That's right, I was looking over your shoulder, and I mean, it's pretty cool because it's tracking your monthly budget. You can see the money coming in, and you can see the money going out. I mean, it's all one account, so it's really easy to see your mortgage getting paid down, although I do feel a butt coming on, George. - Well, I like big butts and I cannot lie. - And we've got a big butt here. - Thanks, Maryland. - With two Gs. - Well, I would tell you, just intuitively, the idea that's presented, which is we're borrowing money at 8.6%, to pay down a 6% loan doesn't really make sense to me. I even actually asked one of my fellow finance professors, about his opinion on it, and he pretty much concurred. - Hmm, well, if I could have my money making 8.6% versus 6%, I think I'd go for the 8.6%. - Right, and this is the same thing in reverse, right? You're paying off a 6% loan that's costing you 8.6%. - So this got George's juices flowing, and he sat down and started doing some calculations to see if this program really does save you money, and his findings are coming up. - Today we're talking about a new way to pay down your mortgage early, and we've actually looked at a program that promises that you can pay off your 30-year mortgage in as little as 10 years. - But does it really save you money? And George did some calculations, he's a spreadsheet master, and so tell us what you found. - Well, and bottom line, Maryland, I guess I found this, it does save you money compared to, as far as interest expense, compared to just paying off your 30-year mortgage one month at a time. But the example that I looked at was a couple making $5,000 a month, who had $4,000 a month in bills, a $200,000 30-year mortgage at 6%. Now with a new way, you would get a home equity line of credit, which is gonna be driven by that $1,000 a month that you have left over. The old way, to do it yourself way, you'd just take that $1,000 a month and use it to pay down your mortgage. - And so your numbers show that you'll save nearly $11,000 more by doing it yourself and you'll actually pay off all your debt at least 11 months faster. So I'm a little confused because the program, the new program is supposed to help you do it fast and save you money. How did you come up with this? - Well, and Maryland, once again, it does do it fast and it does save you money. It's just because they have costs for the program itself, because there's a cost for the annual home equity line of credit, the savings are greater for doing it the old fashioned way. - So what you're saying is in a strictly financial sense, you're better off doing it yourself, okay? But let me throw another butt in. (laughs) - You like these butts. - There's the human factor. Will you do it yourself? - Well, and I think, Maryland, that's the strength of the program because for a person who's perhaps a little less disciplined, I think having that goal right up there in front of you all the time of when you're going to get it paid off, it's sort of that instant gratification that we all love, right? And so I think that may make it worth the money. - Now, could you create your own little visual program for yourself that doesn't cost a couple thousand dollars? - Oh, absolutely. If you have some even pretty basic spreadsheet skills or know someone who does, you could create a program where you say, what if I make an extra thousand dollar payment a month on my mortgage? What's gonna happen? And you'd instantly be able to see it too. Bottom line is this, a better way to pay off your mortgage early? Eh, I think it lives up to that. The best way, in a strictly financial sense, still the old-fashioned do-it-yourself way. - You can get a written summary of today's show on our site at Big Success. That's bigwith2gsuccess.com. We also have a link to the article that we mentioned earlier. And you can also sign up for our Big Success Weekly to get the tips and tools you need every week free to be a big success. - Next time, we'll talk about a resource that great athletes wouldn't think of living without, and neither should you. - Is it a spreadsheet? No. (laughing) Until then, here's to your Big Success. - The Big Success Show at B-I-G-G Success.com. 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