Different Ways To Pay Off Your Home Faster

Now let's talk about the different payoff strategies that you're learning about online. Whether it's from me or another content creator or another guru or a family friend, when it comes to paying off your mortgage early, whether to do it or not to do it, you need to remember that it is a personal decision. Personal decision that has its own set of consequences. This is not about right, right way, wrong way. So it's not about right or wrong way to pay off your mortgage early. I want you to look at this with a lens of efficiency and ultimately, what am I going to personally commit to? What is the path? Because there's multiple ways to pay off your mortgage early and there's multiple ways to not pay your mortgage off early in different ways to go about it. I'll go through the most popular one and we'll map it out. But I want you to look at it from the lens of, at the end of the day, it's a personal decision that will have its own set of consequences. It's not about right or wrong. Focus on efficiency and ultimately, what are you going to commit to? What is the highest chance of you succeeding? Not because of what the numbers say, but because it's something that you'll actually stick to. So I have clients that I work with that just do not understand the home equity line of credit thing and money in and money out, they just don't get it. So I'm not going to beat them over the head every single day on a phone call trying to get them to comprehend velocity banking. That would be irresponsible for me as a coach to do that for that person. There might be people in this room right here that are like, dude, I'm watching your videos for months and months and months. I don't get it. I'm not getting it. It's not clicking. So it's totally fine. It took. It took me about two years for me to, like, fully get it before I started teaching it. Totally fine. Let's figure out the thing that you do understand and let's proceed with that. Do not have fomo. Okay? None of my content ever pushes people to do Velocity Bank. I simply show case studies. Here's a scenario. Mama four. Here's a scenario. Mama three. Here's a scenario. Widow. Here's a scenario. Divorced dad, divorced mom. Here's a scenario. Like, that's all I do all day long. My videos. You know this. I'm not trying to persuade, convince, sell you to do this strategy. I'm simply showing you. Here's what's possible, here's what could be done, here's what this person did. And chances are, oftentimes you relate because you're like, oh, I'm 40 years old. Divorce, second marriage, oh, I'm 50 years old, five years out from retirement, three kids, fully grown. Husband, wife, single mom. You relax, okay? If that woman did it, that guy did it, I should be able to do it. I'll get it. And then you commit the time and then finally light bulb goes off and you're having yourself a blast and you're getting the results that you want. So no fomo. It's not about right or wrong. Personal decision, its own set of consequences. Focus on efficiency, highest chance of success. So let's go through those different options. We have extra payments. Let's just assume everyone in the room here only has a mortgage in this example. Now, where I stand personally when it comes to debt payoff and the order of which we pay off those debts, for me, it's pay everything else off before you get to the mortgage. Pay off all the other volatile high interest credit cards, loans, personal loans, cars, get all that removed before you tackle the mortgage. Or if it's a consolidation move, where you're going to wrap all these debts into a first lien heloc. There could be a play there. There's some scenarios where that makes sense. You look at the overall average cost of interest and you wrap everything into one line of credit. Sometimes that makes sense, sometimes it doesn't. Got to have a coach, got to have somebody run the numbers with so that you can process this. So in this example here, let's just assume all you have is a mortgage. The traditional, most popular way to accelerate your mortgage, making extra payments. So whatever leftover money you have, you're simply making an extra principal payment one time a month, typically around the end or beginning of a month, and you're plopping that right on your mortgage balance. Okay? That's a direct principal payment. The result is the, you're able to put that right into an amortization calculator and basically see how long it would take you to pay it off. Okay? The consequence, consequences, there could be some good, could be some negative here, here's what to be aware of and I'll go through the risk. When you make an extra payment on your mortgage of your cash flow, let's say you're using 100% of your cash flow. The risk that you put yourself in is lack of liquidity for the most part. So during that time frame, And I'll also say this opportunity cost. Those are the two main things. If all you're doing is making extra payments on your mortgage, especially if it's at an interest rate in the low twos, threes, fours, fives, when we've seen inflation be as high as double digits in the last few years, what happens is you're trying to pay down this payment with this extra money. And the opportunity that you missed is where that cash flow could have went during that period of time that you were paying off your mortgage. So if you would have taken that cash flow and let's say, invested it, or even if you just saved it in a separate account, such as a whole life insurance contract, properly structured for high cash value or a high yield savings, and earned 2, 3, 4%, whatever it is, bought some CDs along the way, you maintain liquidity, and it gives you more options. So you lose liquidity when you're making extra payments, because guess what? Life will happen. So when life happens and your expenses increase because you have to do a roof repair, because you have to repair something in the backyard, because wife wants a new patio, because wife wants this, or because you want a new car, right? It's like always something comes up, all right, we gotta take a vacation. It's been years since we've been on a vacation, Denzel. So we're going on a vacation. Odinzell. I have to buy this because, you know, things happen. Gotta buy that. Guess what? You find yourself going into more debt somewhere else. So now you're borrowing more money from a credit card, or you're taking out a loan, or you're doing a home equity loan. And right about when all that happens, that's when those people find me. And that's you guys, for the most part, right? Everybody has their moment where they found me because they're like, oh, shoot, I hit a brick wall. And then you pray. Boom, you find me, right? By no mistake does this happen. I have intentionally set myself up. And the Lord has set me up in such a way where the number one way people find me, especially those that are clients, is they pray. And then God reveals support. And then I come in and support you. I meet you where you're at and help you develop your plan on how to. How to proceed. So let's say we've gotten to that point, and now it's a matter of deciding which direction we're going when it comes to extra payments. That's the cost. So we have to hope nothing goes bad during the 5, 7, 9, 10 years, however long it takes to pay off that mortgage, hope that nothing goes wrong, life doesn't happen, and you have this lack of liquidity, so you don't have any money set aside. And then the opportunity cost is maybe you could have earned more money than the cost of interest on your home. That's an argument to be made if you invest. Depending on how you invest, let's keep it simple. Say you get a brokerage account so it's liquid, maintain liquidity, what's the risk? Simple. Could lose money, right? Of course you could lose money. So you got to have the stomach for investing. And the reality is on a spreadsheet, investing over paying off your mortgage always looks better because of the projections, the rate of return, how much more you can make, all this yada yada stuff. The reality is the average American does not commit to this investing in a separate account brokerage account because fear of losing money. And a lot of people can't get over that mortgage payment. They see the damn interest and it bothers the hell out of them. Comment if you agree. It's probably most of you in this room, you just despise the amount of interest you're paying to the bank. This just is what it is. It's like an emotional attachment that we have to this mortgage payment that really interrupts a lot of our clarity and thinking. We're trying to process decision. It messes us up quite a bit. So investing sounds great on paper because you can maintain that mortgage payment, have that low rate, let's say maybe earn 8, 10 plus percent every single year. And then when life happens, well, the benefit is you maintain liquidity. You can sell some stock, you can pull some money out quickly and handle that expense, but you could also lose money. And will you actually commit to it? Will you actually do it? Okay, then we have the separate account method. This could be a high yield savings or a whole life insurance contract. For me personally, I'm mostly going to lean toward the whole life insurance. Unless the person doesn't qualify, we'll use a high yield savings instead. The benefit here say you have a mortgage at whatever interest rate. Instead of making extra payments to your mortgage, what you're going to do is you're just going to set money aside in a separate account savings account, high yield savings, and you're going to earn whatever you're going to earn 2, 3, 4%, whatever it is. Maybe along the way you buy some CDs, but for the most part you keep all that money liquid. So another benefit of having A separate account with the intent to pay off your mortgage early. So you still want to. All these methods here involve paying off your mortgage early, right? Because the idea is when you invest, you're going to earn higher amount of money than what you're being charged in your mortgage. And then the idea is you would, once you have the amount of money built up in that investment account, you can drain it, pay your house off in one shot, then it's done, and then you restart with your investing again. Some people will accumulate such a large investment account and they have their mortgage and they'll just decide to keep paying it because compound interest is now outperforming way beyond what they're paying in mortgage interest. So they're like, no, I'll never pay off my mortgage, so they'll fall over here and then never pay off your mortgage category. So some people are like that, all good. I have some clients like that as well. The separate account. I like this method a lot because you get a lot of the benefits, you get more options and you don't lose as much opportunity cost and it accounts for life happening. So with the high yield savings, the benefit is you maintain liquidity. You don't take any risk. For the most part, you're going to be earning less interest than your mortgage. So you're not really winning against that. But you have the benefit of keeping all that extra money, that cash flow in the account. So when life happens, you're able to handle it. Cash boom and just keep saving your money. Eventually you build up enough and you wipe out your mortgage in one shot. Chances are it'll take around the same time as extra payments. Maybe it takes a little bit longer. Okay. The one more beneficial in my opinion, is the whole life insurance strategy. So instead of making extra payments to your mortgage, you decide, you know, I'm going to take that cash flow that I was intending to pay my mortgage off with and I'm going to do a combination of, you know, have some money in a high yield savings and I'm going to fund, I'm going to overfund a properly structured high cash value life insurance policy. I'm going to save my money in there. This is going to build tax free. So I get the tax free growth, I maintain liquidity, I get a death benefit in case anything happens to me along the way of paying off my home. So succession occurs. Death benefits paid out. My family, my wife will be fine, they'll have enough death benefit to wipe out the mortgage payment. The whole life would have served its purpose in that time frame. So we're able to structure it in a very unique way. If you're going to do the high yield savings and let's say it didn't make sense for the whole life because of cost, fees, whatever, you do a high yield savings with a convertible term. So maybe you buy some term insurance just to cover the balance of the mortgage, maybe a little bit more and then the rest you keep in a high yield savings. You build it that way. So the separate account is cool. A lot of people on the Internet talk about that. I'm going to start talking more about that I have. But just with the whole life, I'm using that as my strategy. It will take longer than extra payments, no doubt about it because there's a cost with this product, with the whole life. So it takes a little bit longer to pay your mortgage off. But you can argue you'll have more wealth, more money, more liquidity when it's all said and done. Okay, so separate account, invest extra payments. Then we have velocity banking of course. So that's going to be a HELOC first or second position P Lock, maybe business line of credit and not so much on the business line of credit honestly, but really the P Lock home equity line of credit, first, second and then credit cards. What's the benefit there? Well, you do maintain some liquidity, right? You're using debt first to make an extra payment towards something in advance and then you're using your future cash flow to pay back the line of credit in smaller chunks. So let's say you made a chunk towards your mortgage and then life happened. Well, you still have your cash flow that's in the line of credit and that's going to help you handle that life unexpected event. Okay, so with velocity banking you maintain some liquidity. You are leveraging the daily average cost of interest every day. You're trying to shrink that timeline over extra payments. So when it makes sense, when the numbers work out, your really focusing on speed a lot. With Velocity bank you maintain liquidity, you're changing the way you pay bills and expenses and you're recapturing cash flow along the way. Has a lot of benefits there. What are the risk with velocity banking? Well, the biggest risk is doing it wrong. I would say I've had clients before that were using a very high rate line of credit to pay down a low rate debt. Very low. It's too big of a gap. And I say you're not doing anything. You're paying your, you're increasing your cost of Money. So the biggest risk is doing it wrong because you don't understand the strategy, the math behind it. You don't understand what's going on. You haven't taken that time and you watch two videos and decided to go try it out. I often say velocity banking is not something you just try out. This is something that you study first. Build the relationships, do the pregame work, run the numbers, have some accountability, then we go implement. So that when you're implementing, even though you don't still fully know it, you're going to be so far ahead in the first move that we make because of all the pregame work. So you're removing the opportunities of failure when you set yourself up that way for success. Okay, so extra payments, that's going to be in the form of debt. Snowball debt avalanche, cash flow index. You've got invest. That means you're going to invest your money first, pay off debt later. Okay, Separate account, You're going to put money in a separate account that's safe. Can't lose money, safe, won't earn as much, but you maintain liquidity. Velocity banking, different tools that you can use. If and when it makes sense, it's a if and when it makes sense, have to run the numbers, has to be extra payments, no matter what, has to be better than that. It can't be less, has to be better. Biggest risk is potentially doing it wrong. And then I would say things that you can't control is interest rates, right? So we can say interest rates increasing. So maybe velocity banking made sense in Covid. 2020, 2021, 2022. But then when rates started to go up, 23, 24, 25, some people that locked in a very low rate car loan, low rate mortgage, it, it just didn't make sense. So what, what did I do with some of my clients? I said, hey, now it's time to turn off velocity banking. We're to put that in our back pocket, we save it for later and we can look at whole life instead or have a separate account or just simply save money. Okay, the final thing, no matter what strategy you choose, remember it's not about right or wrong. Focus on efficiency. What out of these things, what am I, Denzel Rodriguez, most likely going to do and commit to? And when I know the risk involved of each strategy and which one gives me the most flexibility, the most options, that's going to be another decision factor. You know, I'm going to go with the separate account or I'm going to go with investing Denzel, because that just gives me the most amount of options at play. I have a very low rate mortgage. It's not killing me so I'm willing to do this. Perfect. A foundation. I think that's very helpful. Whichever you choose. I would have some sort of emergency fund. Even Dave Ramsey agrees with me on this. You want to have some money outside of the strategy. Some money that could be 401k money because it's somewhat liquid that could be a tangible asset that you could sell at any point. A collectible item, gold, silver. I want you to have some money off to the side that's outside of extra payments investing separate account Velocity bank so that if and when life happens you've got this separate money that could take care of that or help take care of it so it doesn't throw off our whole plan. It doesn't throw it off completely. I want you to keep that. Now these were all the extra. These were all the strategies to pay off your mortgage early.