Hey what's going on everybody this is Sam Kwak here one of the Kwak Brothers and as you know we
have ton of content in our channel talking about how to pay off your mortgage early and saving
money on your interest. Well with the really low interest rates as well as talks of hyperinflation
you're probably asking well sam is it really worth paying off your mortgage early and is
it worth to do that right now well in this video i'm going to point out to two main traps that you
need to be aware of in your mortgage if you don't want to stay stuck in your mortgage forever past
your retirement age and of course if you're brand new to our channel we talk about housing market,
real estate investing, and how to pay off your mortgage faster so definitely stick around
by subscribing to our channel. So let's get into it right now we're dealing with the
very historically low interest rates and a lot of people are thinking well it may not even be worth
paying down our mortgage merely because we're not even paying that much in our interest the other
thought is well there's talks of hyperinflation therefore inflation would go ahead and eat out
the interests that i would pay over the next 30 or 15 years but the problem is that most people don't
talk about the social economic behavioral change that we've experienced the last 20 to 30 years and
that change has set up a perfect storm for what i like to call the two traps in your mortgage
so trap level one has to do with how often you move now the u.s census bureau study shows that
the average americans move 11.7 times in their lifetime so let's say the average person lives
up to be 80 to 100 years old well if you do the math a person could move every 7-10 years
and the reasons may vary you may choose to move because your kids move out of the house so you
don't you downsize maybe you find a new job across town or you move out of the state so you decide
to sell your house and buy a brand new house in which any of these cases it involves in selling
your home and moving and buying a new home so here's a trap that gets triggered every time you
move every seven to ten years so what i'm drawing for you guys is something called an amortization
schedule or i would like to call the amortization chart now this chart has two lines the line that
goes up and down represents your monthly payment so let's save in this example your monthly payment
is about a thousand dollars a month okay and the line that goes left to right represents the amount
of time you spend in paying down your mortgage so of course on the very left side you got zero years
and as you go on let's say you have a 30-year mortgage where the very right side of the chart is
your 30-year mark so of course the more and more closer you get to the 30-year mark you're paying
down your mortgage now with your thousand dollar mortgage payment there are two parts first is the
interest so i'm going to draw the interest rate line right here and that's the interest you pay in
proportion to your monthly payment so out of the thousand dollars a monthly payment a vast majority
of the interest you pay is actually upfront in the beginning portion of your mortgage now the
second line i'm going to draw for you guys is the principal you pay over time in proportion to your
monthly payment again one thing that you'll notice is that in the very beginning of your mortgage
vast majority of your thousand dollar hypothetical payment is going towards interest and a very small
portion of your thousand dollar monthly payment is actually going towards principal now to break
this down even further principle is what we want to pay down the more principal we pay
down the more equity we build that's the actual mortgage amount that we need to pay now of course
interest as you guys know is the fee that we pay for borrowing that money from the banks so in the
very beginning of your mortgage life cycle in the first five to ten years of your mortgage
vast majority of your monthly payment is going towards the interest and therefore it's feeding
the pocketbooks of the banks now remember how i said the average americans move 11.7
times in their lifetime which is about seven to ten year mark so let's say this line right here
is your seven to ten year mark well if the average americans homeowners move every seven to ten
year mark and they make it to this point right here all you've done in terms of your mortgage
payment has been contributing towards interest more so than your principal payment come on man
so let's say you do make it to the seven and ten year mark you sell your house and you buy a brand
new house get a brand new 30-year mortgage the question is do you get to continue making the
progress you've made so far for the past seven or ten years yes or no no right you'd have to start
all over from from ground zero to back to zero year mark where vast majority of your monthly
payment is again going towards the interest payment now of course yes you can you can get
a shorter amortization you can get a 15 year or 20 year or 25 year amortization instead
even then you're still dealing with the fact that most of the interest will be paid up front towards
the earlier part of your mortgage life cycle so what happens is you're in a perpetual cycle where
you make it to the seven to ten year mark you sell your house get a brand new home and you're doing
this constantly over and over again where vast majority of all your monthly payments thus far
has really been just interest and you're shoveling cash and profit to the banks instead of building
equity and paying down the principal for yourself and again my point is it's not till the later part
of your mortgage life cycle to when your monthly payment is actually contributing more towards the
principal pay down and that is trap number one and noticeably a lot of americans are moving more
often today than the past few years back in the day in the 60s and 70s as you may have observed
a lot of people usually stuck around bought a home stayed there for 30 to 40 years stayed and
worked for the company same company for the 30 years retire and let the company's pension take
care of you well now these days in 21st century we don't see that a whole lot anymore we see a lot
of transitory jobs moving job to job moving from company to company going from one state to another
you know we're dealing with a massive migration right now from california to nevada to illinois
to tennessee new york to tennessee so we're seeing a lot of movement and nothing really is guaranteed
as far as long-term housing anymore and for someone to make an argument against trap number
one they would essentially have to believe that one could live in the same place same house for
30 years and they're 100 certain of that which as you know it just sounds a little absurd but let's
assume that you don't move and you stick around for 30 years or more and that's how it's gonna
work well this is where trap number two comes into play so going back to the seven or ten year mark
which i'll draw a line right about here represents the seven or ten year mark often happens is that
your local mortgage broker or your banker may come and say hey mr business borrower congratulations
you've been doing a great job in paying off your mortgage in the last seven or ten years hey tell
you what come on down to our office and let's go and take this thousand dollar monthly payment
and let's go and get get it down to let's say 900 a monthly payment and of course what most bankers
and what most mortgage brokers are alluding to is a refinance mortgage so if you choose
to go and refinance into another 30-year mortgage for the sake of saving quote-unquote 100 a month
because you went from a thousand dollars a month to 900 a month unfortunately most unsophisticated
homeowners and borrowers are thinking oh my gosh we're saving money this is a great deal
oh my gosh thank you mr banker mrs banker this is such a great opportunity but little do you know is
that if you make it to the 7-10 year mark and get another another 30-year refinance what happens is
you make it to the zone right you make it to this wall you have to start all over back to square one
if you receive your mortgage to where vast majority of your monthly payment the new 900
monthly payment is going towards interest had you just stuck around and not refinanced you would
continue on with the progress where more and more of your monthly payment is actually going towards
principal pay down this is why we see a lot of you know 60 or 70 year old retirees still have
20 or 25 years left to go on their mortgage and they're freaking out thinking oh my gosh like how
am i going to get rid of this mortgage and some people honestly and let's be real have this fear
that their mortgage may even outlast their own life so as you can see despite the low interest
rates as well as talks of hyperinflation well if there's this constant loop of never-ending
you know payments of interest payments and most of your payments are actually going
towards the interest where do you ever get the opportunity to actually make a contribution
towards building your equity building your wealth and ultimately paying down your principal balance
and same goes for student loans as well if people choose to refinance into a 30-year plan or take a
an affordability payment plan this is the cycle that people are are stuck in and they never get
to pay off their student loans so think about this it's kind of a double whammy not being able to pay
off their mortgage forever because they're in this perpetual cycle and at the same time not being
able to pay down your student loans i mean this is a perpetual interest making machine for the banks
and this is the trap that we need to get out of and unfortunately banks like this they love
this they want to continue having you stay stuck in this trap forever and make it make it sound
like you're saving money and make it sound like you can stick around because of the low interest
but in all reality with the social behavioral change it's a it's a lot tougher to actually pay
down your mortgage in time and worst of all please do not refinance your car loans so even with the
facts that i've shared with trap number one and trap number two a lot of you guys will disagree
with me and that's okay but if this gives you an epiphany and if you're thinking oh my gosh
i didn't realize this well go and comment down below let me know what you guys think and would
love to have a conversation with you guys as far as what's going on with your mortgage and
if you're wondering how do you get out of this trap how do i pay off this mortgage earlier with
a better tactic well i have a strategy that's been helping over a thousand homeowners paying
off their mortgage faster i mean just take a look at all these results down here and if you
see it coming coming up and down and i'll show you exactly how the strategy works especially if you
don't want your mortgage outlast in your life we definitely don't want that so go and definitely
check out that video where i will explain the strategy how it works and how it can pay off
your mortgage faster without refinancing making more money or paying extra into the existing
principal balance that's right so definitely go check out the strategy do subscribe and if
you love this video go and smash the like button definitely help us out with our youtube algorithm
but with that being said go and definitely check out the second video and i'll see you there