Can you pay off your mortgage in five to ten years, earlier than 30 years? Should you make extra payments now that you own a home or you’ve owned a home and you’re wondering, “Oh my gosh, I have 30 years’ worth of payments every month like clockwork, these payments never stop? Is there a way to pay them off faster?” Yes, there is a way. So in this video, I’m going to show you how you can pay off your mortgage up to seven years earlier, five years earlier, or two years earlier, and also talk about the two advantages of paying your mortgage earlier. You may choose to pay off earlier, you may not. So here we go. Hi, I’m Mike Patel with First Team Real Estate, and I really appreciate you watching this video. While you’re here, please subscribe and make some comments. So there’s two theories to paying your mortgage off earlier. Some people say it’s advantageous to pay off earlier and some people say it’s not.

Usually, as you get closer to your retirement age or you become 60 years old or 70 years old or even younger than that, you may want to pay them off earlier so that when you retire and if you are retiring, you don’t have any more mortgage payments or mortgage interest payment on a rental property or other properties that you may have. So before I show you how to save on your mortgage interest payments and knock off two years or seven years, I wanted to talk about two advantages of paying them off. So let’s talk about the two advantages. The number one advantage of paying your mortgage earlier is that you save a lot on your interest payments. As you know, every month that you make a payment, especially in the beginning, up to 70%, and I’m assuming that of the payments goes towards your interest. So if it’s a $1,000 check that you’re making every month, the first couple of years, almost 800 of that goes to interest and the rest goes to principal. As you end towards the end, towards the 20th year, or the 25th year, or the 30th year, it reverses. Almost $800 goes towards the principal and then the $200 goes towards the interest. So that is an advantage if you pay off your mortgage earlier by making extra payments. And I’m going to show you how to do that. You can save a lot of money on interest, and I’m talking about a lot of interest money. And the second advantage to paying your mortgage earlier or to make extra payments is that you cut the life off your mortgage payments.

As I mentioned to you earlier, assuming you have a 30-year mortgage or you might have a 20-year mortgage, then you may not want to make extra payments. But assuming you have a 30-year mortgage, if you make extra payments, you cut off the life of your loan from 30 years to by two years, by five years, or even up to seven to ten years, depending on how much monthly payments you make and how disciplined you are to make it every month. So in this video, I’m going to show you, by making extra payments every month, how you cut off. But to let you know, I just recorded a video on the pros and cons of paying your mortgage earlier or making extra payments. The link will be at the end of this video and also in the description. So please watch that. So today I’m going to show you how to pay off your mortgage earlier. But that video talks about the pros and cons should you pay off earlier or not? So please watch it. The link is again at the end of this video. So are you curious to find out how to save on extra interest that you pay? So let’s take an assumption.

Let’s assume in this example that I’m going to give you that you’re buying a $450,000 house. And I’m using that example because the average, medium home price is somewhere around $430,000 as of 2023. So assuming you buy a house for $450,000, or assuming you bought the house for 450 and you put 10%down, which is a $45,000 down payment, your interest rate is 6.5% and it’s a 30-year fixed loan. So if you buy that home at that interest rate, your payment will be $2,560 per month for 30 years fixed. And every month that you pay, in the beginning, you’re going to pay a lot of interest rate. And towards the end of your mortgage payments, towards the 30th year, you’re going to pay a lot of principal. So how can you pay or how can you make payments or how much payments can I make to save a certain amount of years? Here’s an example. Let’s look at this chart. As I mentioned earlier, this is a $450,000 house and your payment is 25 60 per month. So let’s assume that during the first month, you are very dedicated and somebody told you or your broker told you or Mike told you that, hey, if you buy a house and if you start paying $100 a month more every month, this is the amount you will save. So in this example, if you pay $100 a month extra every month from your first month, your standard payment is $2,560 a month. But you are making additional payment of $100. So your payment will be $2,660 a month. By the way, please with your lender if they allow extra payments, because some banks don’t.

So if you do that for 30 years, you’ve paid $2,660 a month for 30 years instead of $2,560 per month for 30 years with just $100 a month. And assuming it’s automatic payment, so you don’t even feel the $100 extra that you paid, then you will knockout, according to the schedule in this chart, you will knock out three years and one month earlier. That means you’ll almost be paid off in 27 years and you will save a whopping $64,000 over the life of the loan for just an extra $100 a month. Now, let’s look at the same example.$450,000 house, 10% down, 6.5%interest rate, 30-year fixed. But now, in case you’re married or you are bodied together with your brother or a sister or a friend or a roommate or a partner, let’s assume you both paid $100 extra. So instead of paying $2,560 per month from month one, you are making a $2,760 a month payment for 30 years. And guess how much you will save by just paying $100 more than in the previous example.

So in this example, you will pay off your loan in about 24 years instead of 30 years. So you’re almost saving six years. The exact amount of years and months you save is five years and six months. And the total interest that you saved over 30 years by paying $200 a month is a whopping $112,234. That’s a lot of savings. Now, are you convinced that you want to pay an extra $50 or $100, or $500 if your mortgage payment is on a million-dollar house or a $2-million house? So let’s take it one step further. In the same example, let’s assume that you are making a $400 extra payment. A wife and husband or two brothers or two partners are courageous enough and think ahead, as most people don’t. But you think thought ahead and say, I want to pay this off much faster. Not in two years, not in four years, but much faster. I hate paying interest rates and making the banks rich. Hey, I feel the same way. So if you pay $400 a month extra every month from month one, your standard payment when you got this loan was $2,560 per month, as this chart shows, by making extra payments of $400, your monthly payment, assuming it’s automatic, so you don’t even feel the hurt of the extra $400. And I’m assuming that $2,560 is a lot of money. And yes, it is.

Any mortgage payment is a lot of mortgage payment. At least that’s what I think. So I’m paying 29 60 a month for 30 years. From the first month, I save nine years and one month off the mortgage. In other words, I pay off my loan in 21 years, assuming I’m 30 years old, I bought this house. So instead of paying it off when I’m 60, I’m going to pay it off almost at 50 years. Old ten years earlier. Wow. Just by paying $200 individually per month, that’s $200 each for two people, and you save a whopping $181,013. Now, that’s a lot of money. So as you can see by making small payments, $50 a month. $100 a month, and consistently with a lot of discipline, don’t miss payments. It’s okay if you miss payments. It’s fine if something comes up. But the idea is that you want to pay up every year, every month. And this is how much you will save.

Another easy way to pay off your mortgage. If you don’t want to pay every month $100 a month and you don’t want to commit to $200 a month or $400 a month every month. Let’s say you do part-time work twice, two weekends. Or you got a bonus check from your tax. Or from your work, you got a refund check from your taxes, you got a bonus winning something. So anytime you have extra money or you have a side hustle $10,000 here, $5,000 there make a payment whenever you can. Because every time you make that extra payment so let’s say in the third year you won $10,000, or you got a refund of $10,000 from somewhere, or you inherited $10,000 on the fifth month and you have a 25-year loan by making that $5,000 or $10,000 lump sum payment. Assuming your banks allow that, then on that 10,000, you’re saving 25 years of interest. That could be I’m not sure, but could be 5, 10 to $15,000. So by making lump sum payments anytime, you can additionally save extra time of payments and interest payment. Now, imagine if you are paying $200 a month and then you also put $5,000 here and there seven, or eight times over the 30 years you could have knocked out the payment at age 55 instead of 60. So there’s a distinct advantage. There are other ways of paying off and in. Next week, I’m going to have a video on how to make bi-weekly payments using that system. So I will talk about that next week. But please watch my video on pros and cons of paying off your mortgage.