- Don't make the $100,000 mistake
being made by millions of Americans.
In this educational video episode,
I'm going to address why any method
of paying extra principal payments
against your mortgage is not the fastest way
to get out of debt.
If you don't understand this,
you need to watch this video to the end.
(gentle upbeat music)
So my name is Doug Andrew
and I've been a financial strategist
and a retirement planning specialist now
for nearly five decades.
And I've been very honored throughout my career
to have authored thus far 12 books,
I'm working on my 13th one.
And I feel so blessed
because they've been best sellers.
I had a "New York Times", "Wall Street Journal"
number one bestseller in 2007
called "The Last Chance Millionaire"
that was written for 78 million
baby boomers in this country
that I feared would outlive their money
if they did not learn
how to find an extra million bucks
that could generate 100,000 a year of tax free income
for as long as they live.
And so it hit the bestseller list.
But my very first book
was actually called "Missed Fortune",
because of the fortunes people miss out on
when they simply don't know what they don't know.
And I self published that.
And pretty soon I was going through
5,000 copies a month.
And I didn't know that was bestseller status.
It got the attention, who became my publisher,
Time Warner back then.
And so they bought the rights to the book,
they allowed me to continue to self publish.
But it was like my war and peace version, okay?
550 pages, it had four different sections,
which could have been four individual books,
but I wanted to tell it all.
So "Missed Fortune".
And then here I had 23 myth conceptions about money.
But we went through about
a half a million of this book.
The very first chapter,
and this was at the turn of the century,
was titled the $25,000 mistake
being made by millions of Americans.
Well, that chapter was read by, you know,
at least a half a million people.
What was the $25,000 mistake?
And now this episode is talking about
the $100,000 mistake.
Well, it's because of inflation,
the time value of money
and everything else has been going on.
So now it's $100,000 mistake.
See, back when I wrote the book,
the average mortgage held by Americans
on their primary residence
was about $150,000 back then.
And so I was proving in the book
that if you had a goal of getting out of debt,
and let's say your definition
of out of debt was not owing
anything on your house, okay?
Now that's not my definition of out of debt.
My definition of out of debt for me personally,
is when I have enough money
in this right hand pocket, so to speak,
that anytime with an electronic funds
transfer a phone call,
I can take the money out of this pocket
and pay off my mortgage or my liabilities in this pocket.
I am out of debt.
My assets, okay, are liquid and safe.
And they will pay off these liabilities
instantly anytime I want.
That's my definition.
That doesn't have to be your definition.
So for the sake of simplicity,
let's say your definition is you don't owe anything.
Most people think, or sometimes I think
they've been duped into being told
to make extra principal payments on their mortgage.
And so the most common mortgage term,
especially at the time was 30 years.
And so, you know, those people are trained
to show you a 30-year amortized mortgage.
And halfway through in the 15th year,
you'll still owe 75 to 80% of what you originally borrowed,
or what's that monster in there is the interest.
And so you got to get rid of that monster.
Interest is bad, bad.
I'm going, whoa, wait, wait a minute.
And now because people would quit.
There's two kinds of people in the world.
Those that pay interest and those that earn interest.
And I would go no,
there are three kinds of people in the world.
Those that pay interest, those that earn interest,
and those who pay interest
in order to earn more interest, okay?
In other words, banks and credit unions,
what's their greatest asset?
Their liabilities.
People go, huh?
If a bank or credit union stopped paying interest,
stop borrowing OPM,
see, they thrive
their greatest asset is their liabilities.
If they stopped paying interest
and borrowing OPM other people's money,
they would wither up and die.
Banks borrow our money
and pay one or two or 3% interest,
and they turn around and make
six, seven, eight, nine, 10, 11%.
They make millions of dollars
paying interest to make more interest, okay?
Now, let's just put it there for right now
and let's get back to this concept.
So, if you want to get out of debt,
and you think interest is evil and a monster,
and you think the best thing to do
is to get rid of it as soon as possible
by paying down your mortgage, okay,
they will tell you one of two or three ways to do that.
They may say, well,
send extra principal payments
against your mortgage whenever you have an extra
100, 200, 300, 500 bucks, and do that, okay?
And I often say, well, that's like saying,
here Mr. Banker, here's an extra $500 this month
to apply towards my principal.
Don't pay me any interest on that.
If I want it back, I'll borrow back on your terms
and prove there's a need why should I have it.
Why do I say that?
Because the bank's not paying you interest on that money.
And when you need it back, okay?
When you need it, the worst is the hardest to get.
I've learned a long time ago.
It's a lot better to have not need than need not have.
It's a lot better to have access to money,
and not need it than need it
and have it be trapped in your house
and not be able to get it.
Because when you need it the worst
and you have to go borrow it back
and you can't qualify when you need it the worst.
Or you have to sell the house,
you have to sell the house usually in a soft market,
and so you lose all that extra money
that you put into the house to accumulate that equity.
I like to keep the money over liquid and safe
earning a rate of return greater
than the net cost of the mortgage.
I mean, most of my life,
I borrowed money under 6%,
but let's just say 6%.
If I borrow money at 6%, and if I do it correctly,
I can deduct that interest off my tax return.
And in a 33% combined federal and state bracket
it's not costing me six, it's costing me four.
So on $1 million mortgage.
I'm not paying 60,000 a year,
I'm paying 40,000 a year out of my pocket.
I'm gonna the other $20,000 back
in taxes because I get to write off 60,000 of interest.
Does that make sense?
I've been making 8% or more
in my favorite financial instrument
that I call the LASER Fund.
How much more is eight than four?
They'll say four.
It's 100%.
Would you hire an employee for 40 grand
that made you an extra 80 grand?
Yeah, that's 100% return on employment costs.
Would you buy a widget machine for 40 grand
that made you an extra 80 grand?
So see, I keep my money,
instead of giving it to the mortgage company,
I keep it over here in this pocket.
Compounding at a tax free rate of return
in my favorite vehicle at 100% more
than the cost of the mortgage over in this pocket.
So you do that.
And so any money that you would be tempted
to send to the mortgage company
or sometimes they'll say,
let me show you something magic.
It's a biweekly mortgage payment plan.
Now this is nothing magic.
Usually on a mortgage, there's what?
12 months, 12 monthly payments.
Well, they just say, well, if you pay
half of a mortgage payment,
every two weeks if you get paid bi weekly.
So you pay half of a mortgage payment every two weeks.
Well, how many weeks are there in a year?
Well, there's 52, and so that's 26.
And you're magically paying an extra month
against your mortgage,
and you will shave off about nine years
off of your mortgage
if you send in half of a mortgage payment
every two weeks instead of one every month.
Does that make sense?
It's nothing magic.
But you're sending extra principal payments
to the mortgage company.
I don't think that's the smartest way to go.
Sometimes people are told,
well, just take out a 15-year mortgage,
just bite the bullet.
If you can handle making the 15-year mortgage payment,
which is higher,
then you'll get rid of that mortgage in 15 years.
I don't care what method we're talking about.
All of them are paying extra principal.
So I did a study.
And in my first book,
I took $150,000 mortgage and I said okay,
if you take $150,000 30-year mortgage,
and you take the differential
between that lower payment
and the 15-year mortgage payment
that you were willing to pay,
plus the tax savings
that you will achieve.
Don't just enjoy those tags,
I have a calculation that shows the tax savings.
The differential between the 15-year mortgage payment
which is higher, the 30-year mortgage payment
which is lower and the tax savings.
You socked that away into a LASER Fund
compounded in this pocket.
You'll have enough money
in your LASER Fund to totally pay off
the 30-year mortgage in 12 and a half years.
If you give it to the mortgage company,
it's gonna take two and a half years longer, 15 years.
Do you wanna get out of debt, so to speak,
two and a half years faster?
And you're actually using $25,000
of Uncle Sam's money instead of your own money to do that.
Or another way to look at it,
you'll end up with 25,000 more than you need
to pay off your mortgage in 15 years.
You'll actually be able to get out of debt
two and a half years faster.
That was on $150,000 mortgage.
So, you know, a few years later
because of inflation, doubling the cost of living.
And in 10 years, that was at the turn of the century,
I said, well, now it's a $50,000 mistake
because the average mortgage in America
a decade ago was $300,000 mortgage.
Now the average mortgage in America is about 600,000.
So that's $100,000 mistake.
If you are sending extra principal payments
to the mortgage company in any form,
by taking a 15-year mortgage or a biweekly plan
or descending extra principal payments,
folks, it's 100,000 bucks.
You're kissing goodbye down the drain.
Other than that I don't have any strong feelings
on the subject.
So folks, math doesn't lie.
So then people say,
well, where do I put that money
where it's liquid and safe earning a rate of return,
at least double what my net cost of my mortgage is.
And I say, well, it's called the LASER Fund.
And in actuality,
I've had mortgages on real estate at 3% tax deductible,
a net cost of two and I've earned 10%
in my LASER Funds net.
How much more is 10 than two?
Don't say, it's 500% more.
In other words, on $1 million mortgage,
I've paid 20,000 in annual interest
and made 100,000 on the money
that I didn't send against the mortgage.
Does that make sense?
That's how money works.
That probably blew you away.
Folks, if you wanna learn more about this,
claim your free copy of this book
and you'll see how to get out of debt
on your balance sheet.
Or in reality, if you wanna just not owe a dime,
you'll have enough money
in a LASER funded to get out of debt
two and a half years faster
than any method of sending that money
against your mortgage.
So learn why and how.
Go to laserfund.com or click on the link below.
You contributed a nominal amount
towards the shipping and handling,
I'll cover the rest of that cost.
I do require a little bit of skin in the game.
But I will pay for the book.
It's 300 pages.
This side is for you left brain learners
who like all the charts and graphs and explanations.
If you learn more by stories,
you flip it over and read this side.
This has 12 chapters with 62 chicken soup
for the financial soul stories.
One on which is really about mortgage
and real estate planning.
But this isn't about you and your brighter future.
I don't want you to miss out on a fortune.
In fact, I prove that if you did this
on your home over 30 years and forward
throughout your lifetime,
it's an extra 1.3 million, 2.3 million,
even more based upon how you understand money works
and how you apply the concepts
that I've introduced in this episode.
So this is about you and your brighter future.
There's also options when you go to claim your book
to listen and learn, watch and learn.
Even schedule an appointment
with an IUL specialist
to see how you can establish
a LASER Fund as a dream solution
for retirement, for real estate management,
getting out of debt,
either physically or on your balance sheet
sooner than later.
(gentle bright music)