Posted by Chris in FL on July 25, 2011 at 13:44:02:
Thanks Bill… Sailor is a good poster here. We just had an exchange once about debt pay down, and I use the example so readers know I am only giving my opinion (it isn’t right for everyone). I probably should have not used Sailor as an example that might be taken out of context, but compared to Dave Ramsey instead.
I enjoyed your post!
Best wishes,
Chris in FL
Paying off a mortgage - Posted by phil harris
Posted by phil harris on July 23, 2011 at 18:19:18:
I believe it is possible to pay off a mortgage in 10 years or less, but is it possible to do it without a guru’s software or by purchacing his book? Just wondering.
Re: Paying off a mortgage - Posted by Chris in FL
Posted by Chris in FL on July 24, 2011 at 21:57:01:
Phil,
I have two thoughts. First, definitely anyone with half a brain can pay off a mortgage in less years without needing guru software… If you want to understand finance more, the right book might be a cheap way to go. Absolutely silly, IMHO, to pay someone to help you split monthly payments to two bi-weekly payments, etc. Do something like that yourself for free.
My other thought, though, and Sailor might fight me tooth and nail on this one, has to do with your interest rate. If you can earn a better return investing money (i.e. - buying investment real estate at wholesale prices and holding as rentals), then why use it to pay off a mortgage early? Sailor’s point - if you are getting on in years, get debt free. My point - if you have a long time left to live, prices are low are rents are high… In the last 18 months, I doubled my single family rentals from 15 to 30, and everything I bought cash flows at break-even or better, with 6-8 year mortgages. I hope to go over 40 or 50 units if the real estate market stays in the crapper long enough. I am 42 now - these will all be free and clear before I am 50! Let’s approximate that at 50 years old, following this plan, I own 50 SFRs free and clear. If, at 15 houses, I decided to use that same down payment money to pay down debt, and whenever I paid something off I rolled the extra money into paying down more debt faster, in 6-8 years I would still not have my original 15 houses free and clear (some were bought in a higher priced real estate market)! Granted, I am in a great area for buy and hold right now, in Central Florida, and I know how to buy good, solid houses at wholesale prices, and I have built a good relationship with a private lender… But this is all stuff that many others can do, too, and look at the difference it will make in my life!!! We are talking decent survival, maybe approaching 6 figure income, versus slam dunk wealthy, start being able to do whatever I want in life, and have an estate to transition to my children!
Paying off debt is good, but I like plan B better!!!
Best wishes,
Chris in FL
Re: Paying off a mortgage - Posted by camgere
Posted by camgere on July 24, 2011 at 10:23:44:
Yes, a simple spreadsheet can calculate this. Mine is approachig it’s 10th birthday. It takes 360 lines to see what happens every month for the 360 months of a 30 year fixed rate mortgage. You only need to use 120 lines of it for a 10 year mortgage. If you have an additional principal payment entry on each line you can have completely irregualr pre-payments and still see what happens.
You mortgage lender needs to be willing to take principal pre-payments with no penalty. You must clearly mark these payments as principal pre-payment. I’ve paid off a 15 year loan in 8 years twice and never had any problems and my calculation were very accurate (pre-payment went in with the next months regular payment).
A 5%, 30 year fixed loan for $100,000 starts off paying $120 of principal the first month and $534 of principal the last month. The last months principal payment is nearly the whole payment. A 5%, 10 year fixed loan for $100,000 starts off paying $634 of principal the first month and $1,060 of principal the last month.
So it should come as no surprise that you have to have an additional $524 dollars a month pre-payment to turn the 30 year mortgage into a 10 year mortgage.
Again, the calculator can handle completely irregual monthly prepayments.
Send me a message if you can’t find a spreadsheet on the net.
Article - Early Payoff - Posted by ken-orlando
Posted by ken-orlando on July 23, 2011 at 23:47:52:
Here is some good advice: http://www.ehow.com/how_4715318_payoff-mortgage-loan-early.html
Re: Paying off a mortgage - Posted by Sailor
Posted by Sailor on July 23, 2011 at 22:47:19:
That’s how I do it (starting w/a 15 yr. loan), but all I use is an online mortgage calculator to figure out how much extra I need to pay each month. The equity accumulates rapidly, & you can see it & gloat w/every monthly statement. However, a key component in this is to NOT overpay for the property. Make your $$$ on the front end by buying right, as appreciation is no longer part of the investment equation.
Re: Paying off a mortgage - Posted by Bill H
Posted by Bill H on July 25, 2011 at 13:10:38:
Good post Chris, now let’s look at reality!
I have two thoughts. First, definitely anyone with half a brain can pay off a mortgage in less years…BIG ASSUMPTION about the brain power! Most are like sheep. Few think outside the box.
A simple payment of $100 per month extra pays real dividends in the long term…but few think this way.
If you can earn a better return investing money (i.e. - buying investment real estate at wholesale prices and holding as rentals), then why use it to pay off a mortgage early?
ANYTIME YOU can make more with the $$$ involved…DO IT…who cares what Sailor says!!!
Sailor’s point - if you are getting on in years, get debt free.
WHOA THERE SAILOR…I’m pushing WAY up there and in debt UP to my EARS! Let all them who have been after me all these years wondering how I did it fight over it when I am gone!
My point - if you have a long time left to live,…WOW! Tell Me HOW TO PREDICT THIS!!!
Now, Chris and Sailor…do not get your $%#@'s on too tight. Just a little levity and frivolity at what is real in life.
I THOROUGHLY enjoy both your posts here and saw the chance to comment “OUTSIDE THE BOX”.
Good Luck, God Bless,
Bill H