- The quickest and smartest way
to pay off your real estate mortgages
is not any way, shape or form
sending extra principal payments against the mortgage.
In this educational episode,
I'm going to show you how to pay off your house
or other real estate properties
about two and a half years faster,
sooner than any form of sending extra principal payments
against your mortgage.
Get ready, this is gonna blow you away.
(cheerful music)
So I'm Doug Andrew.
I've been a financial strategist
and retirement planning specialist for nearly five decades,
but I have authored 12 books thus far
and my first few books were titled
Missed fortune and Misfortune 101,
because of the fortunes people miss out on,
'cause they simply don't know what they don't know.
So, one of the concepts that I taught in my original books
and I continue to practice myself and teach to this day,
but a lot of financial jellyfish did not understand it
and so they didn't accomplish what I'm talking about.
So make sure you are paying close attention.
It's a good goal to want to be out of debt,
but you can actually pay off your house
two and a half years faster
than any form of sending extra principal payments
to the mortgage company,
whether it's a biweekly payment plan or whatever.
So get ready, I'm gonna show you the facts.
When we talk about getting out of debt,
I oftentimes have to ask people
what is your definition of out of debt?
Usually it's, well, that I don't owe anything to anybody.
I don't owe to any mortgage lender on my house.
I go, okay, so let me show you how to get there faster
than you are getting there the way you're doing it,
because somehow you think
that you're getting out of debt quickly
by sending all this extra money against your mortgage.
And I'll show you that's not the fastest way to do it, okay?
It it's an okay way.
It may be good, but it's not the best way.
So there are smart and quick ways,
you can send biweekly payments,
if you understand a biweekly mortgage.
Yeah, what you're doing is
a lot of people are paid biweekly,
so that's actually 26 paychecks a year
and you send half of your mortgage payment in
every two weeks
and magically you've sent in 26 half payments,
which equals 13 full payments,
it's an extra house payment a year
and you'll pay off your house in 21 or 22 years.
And if, ooh, it's magic,
there's nothing magic about it, okay?
Or just some form of sending extra principal,
taking out a 15 year mortgage instead of a 30 year mortgage.
And in my first book, the very first chapter,
clear back in 2000, it said the $25,000 mistake
being made by millions of Americans.
Well, it's about a $100,000 mistake now,
more than 20 years later because of inflation
and what have you.
What was I talking about?
So many people will take out a 15 year mortgage
to tighten their belt
and they want to get their house paid off in 15 years.
And I go, well, that's okay,
but have you ever taken the differential,
between that 15 year mortgage payment, let's say of this
and a 30 year mortgage payment,
which is less this differential,
plus the tax savings you will achieve
the first 15 years of a 30 year mortgage.
Well, you're paying interest on a higher balance
and sock that away over here conservatively
into a tax-free compounding account.
Now some people say, what's tax free.
Well, I'll share that with you.
It's called a LASER fund.
I've been doing it for four decades,
but hello, interest is your friend, not your foe.
I borrow money, let's say at 6% tax deductible interest
and that cost of four after the tax deduction,
and I earn 8% on that.
How much more is eight than four?
It's a hundred percent more.
You accumulate the money over in this pocket,
tax free compounding,
at a rate twice as much as the net cost of the mortgage.
And you'll have enough money in this right hand pocket
to pay off a 30 year mortgage in 12 and a half years,
two and a half years faster
than sending the extra bigger payment on a 15 year mortgage.
And you'll actually do that on a $100,000 mortgage
using about $25,000 of Uncle Sam's money
instead of your own money.
That's why I called it the $25,000 mistake.
What that means is if you have 400,000 in a house
or a house worth 400,000,
you're kissing goodbye a $100,000 down the drain,
because you're taking two and a half years longer
to get out of debt and it's costing you
an extra 100 grand in the process.
You're missing out.
I can prove that to you.
Let me show you.
So those are sometimes smart and quick ways.
They're smarter and quicker ways,
but the smartest and quickest way to get out of debt
is not any way, shape or form
sending extra principle payments against the mortgage.
Every time you do that,
here Mr. Mortgage bankers, an extra $1000 this month.
If I need that back, I'll borrow it back on your terms
and prove there's a need why I should have it.
That's not what we say,
but that's technically what you are doing, okay?
So, do you know that when my first two books were released
at the turn of the century and then Misfortune 101,
we went through a half a million copies of that,
when it was released in 2005.
Well, it got the attention
of the Federal Reserve Bank of Chicago
and they had three gurus do about a 60 page report
about the trade off between mortgage prepayments
and tax deferred retirement savings.
Because a lot of people were saying,
is this guy Doug Andrew and his book telling the truth?
And it took 'em, you know quite a while to do this,
but this was their summary after the title page.
They said, you know what,
Americans, we feel are making the wrong choice,
if they're sending extra principal payments
against their mortgages.
In fact, we consider mortgage overpayments
and misallocation of funds.
Here's these three gurus
at the Federal Reserve Bank of Chicago.
If you change your allocation of funds
by not sending extra principle payments against the mortgage
to kill your tax deduction,
but put it over here, compounding tax free
at a rate of return
greater than the net cost of the mortgage,
you can reap a substantial gain.
And they were only using tax deferred accounts,
not tax-free ones like I do.
And then they said, you know what,
this is rather conservative.
This isn't cutting edge, this isn't dangerous.
This is a rather conservative way of optimizing wealth.
Okay, so it's still it was amazing
how many people didn't get it.
So for years I've helped people
with three different concepts.
One is equity development.
These are for those of you watching this
that want to get out of debt,
but hopefully you're interested in getting out of debt
the smartest and quickest way.
So that's good, but I have a little ditty
that goes good, better, best,
never let it rest, never let it rest,
how good it gets better and better gets best.
So, I also have another module which is equity management,
where I continue to to be my own banker.
Those are on other episodes.
And then ultimately equity conversion,
where there's a lot of Americans
that are sort of house rich
or real estate rich and cash poor.
And you can actually use, let's say a reverse mortgage
and you can then begin to get tax free income for life
or get rid of a house payment
and you're able to be way better off,
because houses were made to house families
not to store cash.
So let me show you a report that I did years ago.
This was because a company had this sophisticated software,
you're not gonna believe how sophisticated this is.
This software would actually have you enter your data
and the credit cards and the automobile loans
and your mortgages and the software could figure out
which credit card you ought to pay off first.
The 12% interest one or the 21% interest one.
Yeah, you can see I'm being facetious here,
I mean this isn't rocket science,
but people would pay 600, 800, a $1000 for this software
that would tell 'em which credit card to pay off first
and which automobile loan they ought to pay off first.
That's a no-brainer.
So, the essence of this was,
well if you wanna get out of debt, here's your income
and you pay off this credit card first
and then you take those payments
and don't go buy another jet ski or snowmobile
on credit or even cash, you take that
and then you apply it against the next credit card
and then the automobile loan and this
and then finally against your mortgage, okay?
And so by getting you outta debt,
the average illustration said,
if you'll take all of this money that we free up
and then you apply it against your mortgage
and we don't consider that, you know,
the cost of living's going up in the process,
which is a fallacy, but lo and behold,
you're gonna have your mortgage paid off
in 12 and a half years.
You're sending extra principal payments
against the mortgage, killing your tax deduction.
Now the house is paid off in 12 and a half years
and then you sock away that money
because we're not gonna let you have any more money
to live or whatever.
And you sock that away into a tax deferred IRA or 401K
in the market and you'll end up with 987,000.
So, you know, that's good, that's good.
That's what most people might do.
Well that's not all your money.
987,000 in a tax deferred IRA or 401k
is only gonna net you 650,000
after you pay taxes on that, okay?
So that's not really the benefit.
So people say, Doug, what would you recommend?
Well, at a minimum, okay,
if your definition of out of debt is not owning a dime,
I can get you there about 2.3 years faster, okay?
So instead of sending extra principal payments
to the mortgage company,
I put it over here in my LASER fund in this pocket,
a LASER fund is a max funded indexed
universal life insurance contract
where I've averaged 11.17,
netting 10.07 cash on cash rates of return
for ever since 1980.
So I would put it over here in a compounding account.
If I'm only earning nine,
but my mortgage is four and a half percent
tax deductible interest, that's a net cost of three.
I'm making nine, I'm only paying three,
I'm making three times as much
as the mortgage is costing me.
Why would I fire an employee
that's making me three times what they're costing me
by getting rid of them, by paying it off, okay?
Even if I borrow at 6% a net cost of four after tax
and I'm only earning eight, eight is twice as much as four,
why would you fire an employee
that's costing you 40 grand
if that employee's making you 80,000?
That's dumb to get rid of the cost of an employee
thinking you're saving money.
Is this making sense?
So by keeping it over here in a LASER fund,
it's compounding and this is very conservative,
but that money that they were using
would be enough in 10.2 years, 2.3 years faster,
to where I could take the money
out of this right hand pocket,
my LASER fund and pay off the mortgage.
And you'll notice this is an interest only mortgage.
So I kept it simple here
and I can pay off the mortgage 2.3 years faster,
usually two and a half years faster and it's the same money.
But see, I did it
because if I give it to the mortgage company,
I can't get it back,
If I get into trouble or get laid off or disabled,
I have to borrow it back on their terms
and prove there's a need why I should have it
and when you need it the worst, it's the hardest to get.
If it's over in a LASER fund,
I can peel off money anytime I want,
'cause it's liquid and safe.
So you pay off your mortgage
two and a half years faster
and then you sock away the difference into a LASER fund,
you'll end up with a million 245,000 and that's tax free.
I use the same rate of return as in the market
and you are only gonna net 650.
This is twice as much money by doing it this way.
And people say, "was that what you do?"
I go, "no".
What do you do Doug?
Okay, I'll show you and then I'm gonna blow you away.
In 10.2 years, when I have enough money
in this right hand pocket so to speak,
that I could with an electronic funds transfer
or phone call, pay off the mortgage, I am out of debt.
My definition of out of debt
is when I have enough money in this pocket
that's liquid and safe,
more liquid and safe than in enough paid off property
that it equals and exceeds the mortgage.
I am out of debt.
My assets are over and above the liability.
Does that make sense?
By not doing that, I'm not firing the employee
making me three times what they're costing me.
That's dumb.
Why would I do that?
That's what happens if you pay it off.
I am out of debt under my definition.
Now you don't have to have my definition,
I'm just telling you to mine.
I'll have 1,800,000, I'll have another 600 grand
by not firing the employee
that's making me three times what they're costing me.
But that's not what I do.
People say, "well what do you do?"
This is a one-off.
This house that I had a $210,000 mortgage on
keeps going up in value.
So every five years on the average I refinance it
and I actually every time I refinance it
for a newer higher mortgage, I get on schedule
to pay off the newer higher mortgage
faster than I was on schedule
to pay off the older lower mortgage.
Did you hear what I just said?
Because every time I separate equity,
I'm not gonna spend it, I'm not gonna consume,
I'm gonna put it to work at a rate of return
double or triple the net cost of the mortgage.
I get out of debt faster,
this number goes to 4 million, 6 million, 10 million.
If I repeat the process, that's what thrivers do.
They repeat the process.
Math does not lie.
And so by repeating the process,
every five years the mortgage bars go up,
but the green bars go up even faster
and this thing goes like this outta sight.
And so I end up with five and 10 million
instead of just doing it once, you repeat the process.
What does this all mean?
Based upon what most of those people do
by sending extra principle payments against the mortgage,
they're gonna pay about 96,000 of taxes
because they killed their tax deduction.
The second way, you pay still 83,000
by paying it off in 10.2 years.
If I don't pay it off, it's zero, okay?
Which would you rather do?
96, 83 or zero?
Good, better, best.
How about the difference
between what you are paying for the employee
and what the employee is making you?
So the difference between the 535
and the 118 is 416 the good way,
but it's 735,000 a profit the better way.
But the best way, and it was just a one-off,
it's 1,242,000, here is how much I accumulate.
I'm coming out ahead 839 grand,
by not firing the employee
that's making me double to triple what they're costing me.
So if you look at the summary, this is good.
Half a million is good if you discipline,
but three quarters of a million is better.
But 1.2 million is best.
I prefer best.
Other than that,
I don't have any strong feelings on this subject.
So if you wanna learn more, and if this is intriguing you,
I would love to gift you a copy
of my most recent bestselling book called the LASER fund.
'Cause you're probably wondering,
what is this vehicle that allows Doug
to earn 9% compound interest tax free.
And that's why he makes three times
as much as the 3% net cost
of a four and a half percent mortgage.
Well, it's called a LASER fund.
What is it?
It's a max funded indexed universal life insurance contract
structured correctly and funded properly.
And this is where I earned 11 netted 10 for ever since 1980.
You can do this too
by diversifying in LASER funds and rebalancing.
So if you wanna learn,
I would recommend that you read two books,
this one and this one, okay?
This one is for the left brain learner
that has all the charts and graphs and explanations.
If you're more of a right right brain learner,
you learn by stories, you have to flip it over to this one.
This has 62 actual client stories.
Now you can go to Amazon
and these are 20 bucks plus shipping and handling.
If you do that, thank you.
But I'll gift it to you free.
You just simply go to LASERFund.com
LASERFund.com or click on the link below.
You contribute a nominal amount
towards the shipping and handling.
Come on, I require some skin in the game,
but I'll pay for the book.
I'll fire out a hard copy to you
and while you're in there claiming your free copy,
if you like to listen and learn or watch and learn,
check out the audio and video formats.
There's even educational webinars we do on a regular basis.
They're free.
You can register for one of those.
Also, if you want to have a chat
with an IUL specialist that I oversee
that knows how to do these correctly,
you can schedule an appointment
and they'll create illustrations
that will show you how a property structured LASER fund
may help you in your particular set of circumstances.
But if you wanna get out of debt,
the smartest, quickest way,
don't send extra principal payments to the mortgage company.
Put it over into a liquid safe account
compounding at a rate of return,
double or triple the net cost of the mortgage
and you'll get out of debt
at least two and a half years faster.
(cheerful music)