How To Pay Off Your Mortgage Faster

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Sending extra principal payments against your mortgage is not the fastest way

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to pay off your mortgage. In this episode, I’m going to address the question that

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I’ve answered numerous times in different ways.

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How to pay off your mortgage faster. It’s not what you think.

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I’m Doug Andrew and I’ve been teaching people about how to optimize their

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assets and minimize taxes and get their house or their real estate paid off

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the quickest smartest way now for more than 46 years. I’ve written several books

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about it. But it’s not what you probably think. I’m

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here in my radio studio and I’ve had a weekly radio show now

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that’s broadcast nationally for 12 years.

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Prior to that for 35 years, I help my own clients get out of

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debt the quickest smartest fastest way. And it was not any way shape or form

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sending extra principal payments to the mortgage company as I’m going to share

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with you. But as I began to teach this from 2001 to 2007, I had

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4 best-selling books. One became a New York times wall street journal number

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one bestseller, my books are over here, some of them. But I’m going to allow you

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the opportunity in this episode to click at the link

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down below and get a copy of my most recent

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best-selling book that retails for 20 bucks.

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You contribute $5.95 towards the shipping and handling

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and i will pay for the book and send one out to you free. It’s 300 pages of

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information. But there is a chapter in there that

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addresses exactly what i’m talking about right now.

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But if you want to know and understand, here we

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go. You know, a lot of times there are all kinds of ways and ideas

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that people tout how to get out of debt or

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pay off your mortgage magically 10 years earlier or 15

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years or in 12 years. And every one of them seems to talk

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about sending extra principal payments to the mortgage

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company. So, let’s talk about various ways that people

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sort of get duped into doing that. So, let me share with you a story.

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I met uh one day with three finance professors

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years ago at a major university. And they said, “Mr.

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Andrew, we teach all of our advanced finance students here at the university

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why when they go out and they purchase their first

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home, why they should take out a 15-year amortized mortgage if they can afford

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the payment rather than a 30-year amortized

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mortgage.” I said, “Really? Why do you do that?” And

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they looked at me like, “Well, duh?” Maybe they meant

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Doug, I don’t know.” They said, if you just bite the bullet and pay a higher

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mortgage payment, you will save yourself a grundle of interest. You’ll have your

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house paid off in 15 years instead of 30 years.

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And then you can begin to sock away the same amount of money into

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an investment like a tax deferred ira or 401K.”

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I said, “Gentlemen…” There were 3 men. I said,

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“Gentlemen, your finance professors. Haven’t you ever taken the differential

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between a 15-year amortized mortgage payment which is higher and

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a 30-year mortgage payment which is lower.

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Taking that differential plus the tax savings?”

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You will achieve on a 30-year mortgage especially the first 15 years of a

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30-year mortgage versus the 15-year mortgage.

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And with a system socked away that differential

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over into an account compounding tax-free.

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Well, right off the bat, they go, “What’s tax-free?” So, I had to educate him on my

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favorite vehicle where I’ve accumulated accessed

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and transferred my money tax-free for 46 years. I call it The Laser Fund.

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It is a max funded tax advantaged insurance contract

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where i have earned rates of return averaging between 6 to 10 percent.

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Many years, I’ve earned as high as 16 and even 25 percent and more.

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But I’ve averaged the last 25 years 10.07%.

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But even if i only earn 6 percent tax free,

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it is twice as much as I’m paying net on my mortgage.

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They said, “Never heard of that.” I wasn’t surprised.

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But they said, “No, we’ve never done that math.” I go, “I thought so.” So, I took out my

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HP 11c calculator and right in front of

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them I did the calculation and I said, “Look.” They were flabbergasted.

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By taking the money, they were telling their

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students to pay in a higher mortgage payment, a 15-year mortgage.

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Now, it could be a 15-year mortgage or you just send extra principal payments

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to the mortgage company. I don’t care what method you’re using. Instead of

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doing that, you take that money and put it over here

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in this pocket. And you’re earning compound interest tax

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free. This pocket is the simple interest

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declining balance tax deductible on the mortgage.

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Don’t kill your tax deduction. Every time you send extra principal payments to the

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mortgage company, it’s like saying, “Hey, here Mr. Mortgage Banker. It’s an extra

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100 bucks this month. Now, don’t pay me any interest on that. If

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I want that back i’ll borrow it back on your terms and prove there’s a need why

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I should have it.” Now, when I word it that way, it sounds

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pretty stupid, doesn’t it? Well, see that’s what’s happening.

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You’re not accomplishing anything because the amount of money

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you put into the house, equity earns a zero percent rate of

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return. It doesn’t matter if your house is mortgaged to the hilt

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or free and clear. It’s going to go up or down in value

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based upon the real estate market. Has nothing to do with how much

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equity is in there. When I separate my equity or keep it separated,

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I give it the ability to earn a rate of return.

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And I can earn predictably 6, 7, 8, 10 percent

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compound interest over here in the my my right hand pocket. This is in the laser

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fund that i’m talking about. And the mortgage which is maybe 6 percent tax

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deductible is only really 4% in my

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33% tax bracket because I can tax deduct the interest.

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If I borrow at 4.5% in a 33%

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bracket, it’s only costing me 3. If I borrow it 3% which I’ve done

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on many real estate properties, it’s tax deductible. It only cost me a

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net of 2%. So, let me just cut to the chase. Every

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million dollars of real estate equity that is not tied up in the property, I

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have it over here in what I call my laser fund that you can learn about. I am

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compounding and earning a 9 or 10. Let’s say to say 9. So,

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I’m earning 9% compound interest tax free.

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Over here, I am paying 4.5 and a net of 3.

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Or I’m paying 3 a net of 2 because I’m tax deducting the interest.

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How much more is 9 than 3? How much more is 9 or 10 than 2?

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It’s 300%. It’s 500%. It’s 5 times more

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money. Again, would you hire an employee

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for 20,000 or 30,000 if that employee made you an extra

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90 or 100 thousand? If you do the math,

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the money you would be tempted to pay to the mortgage company

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to pay off your house, if you put it over here in this side fund,

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it will actually compound and grow to enough that these finance professors

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they were flabbergasted. There was enough money in 12 ½

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years to pay off the 30-year mortgage.

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2 ½ faster than the 15-year mortgage. And we

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actually redirected in the illustration $50,000

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of otherwise payable tax that causes they support. In other words,

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I was able to use a lot of Uncle Sam’s money to get out of debt 2 ½

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years faster. But if I get sick, if I get laid off, if I

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get disabled and I have my money over here in this

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liquid side fund, I can access it with a phone call. If

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it’s trapped in the property, if I pay off the property,

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there’s only one way to get my money out of there.

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That’s solid. And if the real estate market is really bad,

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I’m going to lose. And if I pay it in extra principal payments,

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I have to borrow it back. And when you need the money the worst, it’s the

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hardest to get because you can’t qualify for the mortgage

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if you’re hurting. And so, I keep my real estate equity separated for liquidity

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safety and i actually get out of debt faster than giving it to the mortgage

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company. But you know what? When I have enough money

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in my right hand pocket that I can pay it off 2½,

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3 years faster, I physically don’t do it. Why would I

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kill an employee… Why would I fire an employee

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that’s making me 100 to 500 percent more than they’re

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costing me? When I do that, I can prove to you in

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this book mathematically that you’ll end up with 1.8 million more

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money. At the end of 30-35 years, you’ll have maybe 3.2 million more dollars

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in your side fund by not physically paying off the mortgage. Because anytime

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you want, you make a phone call you can take the

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money out of here and pay off the mortgage.

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So, my mortgage is paid off in 10 years, in 12 years.

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Actually faster than giving it to the mortgage company anytime I want to.

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But when i don’t physically do that, it continues

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to compound at 100, 200, 300 percent more than the cost of the funds.

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It’s up to you. If your goal is to get out of debt,

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I can get you out of debt much faster than giving it to the mortgage company.

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But if you want to continue to make more than the cost of the funds,

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this is how banks make money. They pay us low interest and they loan it back

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out and earn higher interest. This is what makes the world go around.

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This is the parable of the talents in the bible Matthew 25.

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When you understand this, you’ll begin to understand how wealth is created. And

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this is what makes the world go round. And you’ll

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be able to end up with millions of extra dollars rather than just

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paying off the house. In other words, I sleep

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way better at night with my house mortgaged and the

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equity that I could pay off the house separated over here

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compounding tax-free because anytime I want.

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I can take the money out of here and pay off the house. On my balance sheet, it is

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paid off. This asset will wash out this liability

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that fast anytime I want. But this is continuing to grow way

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faster than if i take this asset and pour it over here and it earns zero.

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Because equity in real estate earns a zero rate of return in the property.

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It’s going to go up or down in value regardless of whether I pay it off

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or whether it’s mortgage to the hilt. Does that make sense?

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If this is a rousing curiosity, I want you

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to learn more. Dive into this book. Watch some of my other YouTube channel

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videos on this topic. How to become your own banker.

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But again, claim your free copy of this 300-page book. It retails for 20 bucks.

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But if you simply go to laserfund.com and contribute $5.95 towards the shipping

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and handling because it costs a little bit more than that usually. I’ll pay for

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the book and fire it out to you. And there’s options in there if you like to

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listen and learn or watch and learn. But as you begin to understand this

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concept and somebody asked you, “Hey, how are you paying off your house

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the fastest way?” You’ll blow them away when you educate

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them on how money really works.