this is Sam Kwak, one of the Kwak brothers, real estate investor, and the
author of the book, fire your boss and in this video I want to show you guys how
you can pay off your mortgage within five to seven years. Now, Before I go on
with the breakdown and the explanation of the strategy, I want to make sure you
guys get some disclaimer so that you guys are protected and then I am
protected as well so real quick I am NOT an attorney I am NOT a CPA nor am i a
financial planner so anything that I say or mentions of legal tax or financial
planning advice please don't take it as an advice but rather as a suggestion
based on my own experience and my own understanding of the strategy now this
is gonna be also a short 15 less than 15 minute video so make sure don't try this
alone okay if you guys have any questions if you guys any need any help
if you guys need some personal help I'm gonna leave a link down below at the end
of this video I'm gonna give you a link to go to to see further explanation and
I'm also gonna give you guys a little more breakdown in that in the link that
I'll send you to at the end this video so make sure you guys understand that I
get it there's other videos that will show you this strategy but remember it's
really crucial that you get some help a third party or a third pair of eyes sort
of speak to help you guys use the strategy so the purpose of this video is
just give you an overview an idea a possibility on how you can implement a
strategy in your own situation so that you don't have to pay you know a huge
sum of interest and spend all the time the world trying to pay off your
mortgage so let me go ahead and flip the camera around and I'm gonna show you
guys using a marker and piece of paper give you some illustrations and how
these how the strategy will actually work all right guys I'm gonna flip the
camera around so I'm gonna show you guys to break down and and these explanation
as far as how this strategy works now before I get to the actual strategy I
want to show you guys how and why mortgages work right and why I think
they are inefficient so I'm gonna break down the mortgages in a chart for you in
relation to interest versus principle now for those don't know what principal
is principal is the actual loan balance so if you have a hundred thousand dollar
loan you're bound your your principle
balances $100,000 get it interest is is the expense that you pay to use the
bank's money okay that's basically bank's profit so I'm going to draw the
chart for you here the x-coordinate it is time so we're
gonna label with zero months this is gonna be 30 years and right between is
15 years okay this is gonna be your monthly payment amount monthly payment
so let's say we're gonna give it a give a good example here a hundred thousand
dollar loan okay five percent interest
at 30 years a ssin it's gonna be just around about four or four hundred
dollars right and guys don't quote me here I don't have the amortization
calculator in front of me but based on my experience it's around four hundred
bucks for principal and an interest of all so with that four hundred dollars in
mind this curve here is gonna be your interest payment and this curve here is
going to be your principal balance so if you guys notice that first you know the
first half fifteen years bulk of your hundred payment is actually
interest payments right in the early months very little is gain taken out of
your actual hundred thousand dollar principal balance so in that four
hundred dollars most people think that if we make that four hundred payment our
loan is going back down to ninety nine thousand and six hundred bucks right
guys that is not the case in fact maybe like fifty hundred bucks if not even
less are gonna be the actual principal payment that's gonna go and lower the
the balance from a hundred thousand to you know the principal payment whatever
we're subtracting here so do you guys see how the first fifteen years you guys
are actually not making much progress as far as paying off your loan in fact the
first ten to fifteen years this is where the banks make money thanks
profit does that make sense guys so what's really interesting and for me
it's kind of entertaining most bankers will come to you and say hey you know
it's been about 10 years how would you like to refinance your mortgage for a
lower payment how would you like to pay $350 instead of $400 right most people
would say wow you know I'm saving $50 that's actually a pretty good thing but
what sucks is that and what they don't tell you is that we're basically
resetting our clock back to zero months and we're paying all of this interests
all over again kind of sucks isn't it right we're actually paying more
interest by refinancing by resetting a clock back to zero right because if we
did a refinance and continues and paid to 15 16 17 18 and so on we're actually
gonna be making more that principal payment and we're actually gonna be
doing much better in our progress as far as paying off our our principal balance
now what's really important is that this is something that you should know if you
guys are taking notes or if you guys have pen and paper in front of you the
lower the principal balance right as the principal balance gets lowered so will
be interest right I'm a huge Star Wars fan so I'm gonna make this reference if
you if you destroy the shield generator the Death Star is open to being a you
know vulnerable I know guys I'm a geek I'm in there I wanna that's the best
reference an analogy can give you so kill the principal and you'll also kill
the interests too so it's really important that we take the principal
balance down so that we're not paying interests does that make sense so that's
one of the pillars or I should say the core kind of supporting you know
methodology to making this strategy work okay now the other ins illustration on a
hundred thousand are alone at five percent interest
okay I know I can't spell here 30-year mortgage EMAS ation most people think
five percent interest is not bad okay but little do people know that actually
will amortize and will become compounded to actually be coming around 80,000 to
$100,000
on interest alone so on that hundred thousand dollar loan that's the
principal balance on a 30-year Bogey's 30-year amortization five percent
interest we're actually paying hundred thousand dollar interest alone plus our
original loan amount is gonna be around one hundred eighty thousand to two
hundred thousand dollars we paid to the bank now guys if we're gonna pay her
thousand dollar interest we just bought a bank another house right we got a
house and they got a house so you know you guys can see how mortgages kind of
suck doesn't it right we're paying a lot of interest
take so long 30 years that's like you know that's that feels like forever it
really does right I'm actually scared that some of these banks are coming out
with fifty realization for you know the pseudo pseudo loans that is crazy right
that is insane that's ludicrous this shouldn't be the case and that there has
to be a better way in paying off our property there has to be a better way to
buy houses without paying 100 percent interest to the bank there is there is a
methodology there is a strategy that I'm gonna show you and this is why you're
watching the video right to pay off your mortgage faster and you guys probably
already know this right this is all gonna be in what's called Truth in
Lending statement banks will give you this and though they won't tell you the
truth and how mortgages work now there's another debt instrument that
that I like to use to pay off your mortgage way quicker and with this
strategy we're gonna accomplish are these these are the objectives or I
should say the overall concept overall finished touches as far as how the
strategy work so this strategy is called velocity banking what we're doing is
we're we're accelerating how our debt is being paid and it is known that about
sixty six percent interest savings with this strategy we've got about sixty six
percent of time saving as well
and it's something some cases 5 to 7 years of total payment amount and we're
gonna keep the same amount of expenses alright we don't have to incur more more
loss we're not paying a penny more on the mortgage trust me
and same amount of income so I'm not gonna tell you to go get a better job
not gonna go tell you - you know skimp and save right save and save every
single penny right I'm not gonna tell you to go clip coupons guys what I'm
telling you here what this strategy will help you is still keep the expense the
same still keep the income the same same way but we're saving 66% an interest and
66% on time of of the payment period cool and some of you guys might be
saying this sounds way too good to be true this has to be some sort of scam
right or something guys may say this is too risky this is two different guys I'm
gonna show you the overall general concept as far as how this work and the
math behind it now this is the only gonna be a short video you're not gonna
get the full understanding I get it most of you guys want that's what I'm gonna
I'm gonna share a link at the end of this video on on a live example I'm
gonna actually show you a spreadsheet an Excel spreadsheet and give you guys the
actual breakdown as far as how the strategy will work in numbers but for
now I'm giving you guys the concept so I'm gonna introduce you guys a new debt
instrument a new way I knew I should say a revolution right but this has this
actually has been around for a little bit and most people don't know it's
called home equity line of credit
also known as a HELOC now the banks have been selling this product for about 15
17 years it's been around for a little bit but the reason why bankers don't
tell you about this instrument is because remember huh you remember our
illustration with this you know they want you to make you know all this crazy
they want you to actually pay right where to go
I'm trying to give you guys the illustration again they want you to pay
a hundred percent right they want you to pay this amount interest they don't want
you to save interest it's not that's not their interests right that that's funny
that's not their interest right there that's that's not what they're after
they want you guys to make ton of interest payment so they can make money
even though the interest rate is gonna be variable and and it's gonna be higher
than a mortgage why those two things aren't gonna matter as much and it's
actually gonna save you more money this way okay I want to show you I know it's
a little backwards and it could be confusing I'm gonna show you guys number
one the distinction between a mortgage versus a HELOC here we go so lowest
mortgage versus a HELOC first of all key locks are open are open-ended and your
mortgage your mortgage broker slash banker will know this open-ended and
this is gonna be closed ended what that means is let's say for example you make
a payment of thousand dollars to the banks I'm gonna draw the best bank as
possible there you go right that money cannot be on a mortgage situation you
can't use that again right you can't use it okay but on a HELOC you make the
thousand dollar you made a thousand dollars on the HELOC principle payment
you're gonna be able to use that thousand dollars again does that make
sense guys so it look it works just like a credit card credit card you have a
limit and a home the whole nine yards here in the mortgage you're not you're
kind of stuck right you pay the thousand dollars that's it it goes to the
principal and interest the end on the HELOC you use thousand dollars you pay
it off again you use five hundred dollars pay it off right just like a
credit card now the next thing the distinction is that he locks the the the
interest is calculated and applied on average daily balance and what that
means is that every day so Monday let's say you have a hundred dollar balance on
Tuesday you have $90 balance and on Thursday
let's say you have $50 balance right so each day you bring down the daily
balance so well your interest go down someone who's really quick show you guys
how the average daily balance works let's say you have a hundred dollars
just like the Monday's example all right it's gonna be multiplied by the interest
rate so point zero seven get it and it's gonna be divided by 360 days it's the
commercial lending year and whatever that is is gonna be the average daily
interest right and that's gonna get applied every single day as long as you
have hundred dollar balance so let's say from Wednesday through Friday you have
hundred dollar balance from Wednesday through Wednesday through Friday
whatever this amount is getting applied each day but let's say from Wednesday to
Wednesday you had 100 bucks balance on Thursday you have 90 dollar balance well
guess what guys the next day this is not gonna be hundred bucks this is gonna be
ninety dollars so on Monday or I'm sorry Wednesday you may have had let's say I'm
trying to calculate here let's say five dollar interest well the next day
because the balance is lower Thursday not Tuesday we're going backwards here
Thursday you may have more like a third for dollar interest so you see how the
balance on a HELOC every day it matters okay the longer you have lower balance
the longer you'll have smaller amount of interest going out okay so this is the
key this is one other key a second pillar so you know you can call it that
to understanding why he laughs are better okay so let's go ahead and show
you guys the actual strategy this is my last sheet of paper so I better do a
good job all right so what we're doing is there's really two ways to skin a cat
here okay there's two ways to do this strategy I'm gonna show you guys one way
okay like I mentioned earlier I'm gonna show you guys the full illustration of
this method and in a link that I'm going to put down below at the end of this
video so let's say back to the example $100,000 mortgage
$100,000 balance okay this is a mortgage
okay what we're doing is we're gonna go ahead and open up a home equity line of
credit so obviously this is gonna require a little bit of equity to have
so let's say we have we were able to raise or I should say and open a twenty
five thousand dollar limit HELOC so what we're doing here is some people might
say we just got another twenty five thousand dollar loan that is not the
case here guys so if you have this is like getting a twenty five thousand
dollar credit card we didn't get any more alone so what we're doing is we're
taking that twenty five thousand dollar credit credit line that we have with the
HELOC and we're making a principal payment principal payment of $25,000 so
now our ending balance is gonna be seventy five thousand dollar balance
here and this is gonna be a twenty-five thousand dollar balance so seventy five
thousand plus twenty five thousand we still have hundred thousand dollar
dollar balance in terms of debt okay we don't we didn't incur any more debt all
right a lot of a lot of people seem to confuse that HELOC they think it's
another mortgage or equity loan product it's not okay so we we take in the
principal balance and and and put it here does that make sense and what we're
gonna do here from now is we're still going to continue to make our mobile
payment every single month okay we can't forget that all right unless we want a
foreclosure which we don't want what we're doing here is that we're gonna
take our entire income okay so you guys think I'm gonna be crazy here let's see
our we have our income our monthly income is five thousand dollar income
and make a principal payment against the HELOC so our balance now is twenty
thousand dollar balance
and we still have a $75,000 balance here does that make sense but here's a trick
guys out of this twenty twenty thousand dollar balance we still have expenses
every month don't wait right we have kids we gotta
pay for diapers right we have to pay for groceries so what we're doing is we're
paying you know groceries here right groceries we're paying for kids expense
all right we're paying we're still paying our mortgages when we our
mortgage monthly monthly mortgage right we're paying for other bills but we know
that this all of this is not gonna happen like right away next day so
remember our average daily interest balance concept right we're not gonna go
and deposit five thousand dollars on Monday and next day on Tuesday we're not
gonna incur forty five forty five hundred dollars of of expenses it's
gonna happen you know it's gonna spread out right it's gonna be hundred dollars
here 105 hundred dollars there $700 next week so between I'm gonna do my best to
explain this part here so week one we have let's say we spent five hundred
dollars on groceries that means we have a new balance of twenty thousand five
hundred dollars on HELOC right but our total balance is twenty thousand five
hundred plus seventy five thousand balance that comes to ninety five five
hundred total debt does that make sense now guess what guys using it knowing
what we know about average daily balance we're getting up our interest is getting
applied on twenty thousand five hundred dollars not twenty five thousand dollars
of an imbalance so even if we do have I'd say a seven percent Interest okay
which is usually he laps are higher than mortgage interest that 7% interest is
now getting applied to twenty thousand five hundred dollars instead of twenty
five thousand dollar balance so if this was a mortgage balance of ninety five
thousand five hundred we just saved a whole crap ton of
interest around right right there Plus that $20,000 principle payment we did or
$25,000 principle payment we did on the mortgage we not only we saved interest
there but we also saved like close to man had to say about five to seven years
on that single $25,000 payment probably be more I might be even be
confident to say 10 years we just saved 10 years of that mortgage the mortgage
does that make sense guys say in week 2 we spent additional $2,000 on whatever
expenses you may have you know groceries kids you know they all add up right so
at the end the total balance now including the mortgage balance and the
HELOC balance is give me ninety seven thousand and five hundred dollars so
essentially our he life is now becoming a checking account right nothing has
changed right we're still making the same expense the same income now the one
thing that I forgot to mention is that you do need to have leftover money at
the end to have the HELOC balance come down as well they know the principal
balance of the HELOC right in other cases that you should not be spending
more money than what you're making so if you are if the expenses it let's say is
$4,500 that $500 is what's bringing down the
balance so over time that HELOC balance is gonna come down zero all right it's
gonna come back to zero the balance and but again we still have that limit we're
gonna take another $25,000 and bring that $75,000 let's say you know over
time we're gonna have balance come down in $60,000 anyways because we've been
making that mortgage payment right over time so by now you know what by the time
this becomes zero right this would have come down as well to $60,000
so now if you take another $25,000 principle payment against the mortgage
we're gonna be back down to $35,000 you guys see that's gonna probably chop off
another ten years does that make sense guys right you can you guys see how
quickly we can pay off your mortgage using things to the average day balance
right and we're chopping this down way way way quicker so we're doing is this
is interphase shit and converting it to what's
efficient you can save so much money more money on this side then letting it
sit on a schedule and having it pay every single month now some people will
argue with me and saying Sam why don't we just take the extra money that you
you have you know in this case five hundred dollars and just make an extra
payment on that mortgage well guys that defeats the purpose of having lower
lower average daily balance in this case when we brought the five when we
introduced the idea of $5,000 income principle payments against the HELOC we
brought the average daily balance from balance from twenty five thousand to
twenty thousand right and like I mentioned you're not gonna be spending
up that forty five hundred dollars worth expenses the next day right you can be
spending hundred dollars here one hundred five hundred dollars there two
thousand dollars you know next week so between those spending you're saving
that interest just like our earlier micro example Wednesday into Thursday
between those two you know between your spendings that's where you're gonna save
the interest right we're cutting the mortgage balance from back end instead
of front end if that makes sense so guys if you guys need an actual
illustration I do have another link I'm gonna put it down below right underneath
underneath the video if you need a real-life example if you need real
figures I have actually made a longer video about 30 minutes with actual
spreadsheets I made an actual example with real
interest rate current market rate I'm going to show you how the strategy
actually works on an excel sheet the math does not lie my numbers don't lie
I'm gonna show you in an Excel spreadsheet how this strategy actually
works in number sense I know I explained it in a very conceptual way you know
I've made a really quick diagram but if you guys are like like me and you're a
numbers person you're very analytical if you guys want to actually see the real
number behind this you know this this concept I'm going to show you it's
called chop my mortgage calm so I'm gonna write this sooner
there you go I'm running out of papers so I'm gonna write it right here so go
to a chop Oh chop my mortgage.com go to that link
guys have emojis calm I'm gonna also put it you know underneath this video you
can also look in the link description box if you're watching this on YouTube
I'm gonna give you guys real live illustration also because I'm a real
estate investor I want to show you guys how to use this strategy also on rental
properties so you guys can pay off your rental properties and I will also show
you guys on ideas on how to take this HELOC strategy the velocity banking
strategy and turn it into an income strategy isn't that cool so what you
thought was it was a strategy to pay off your mortgage quicker I'm gonna also
show you guys how to use the this this method here to also increase your
monthly income so if you guys are interested in in saving your same your
time on your mortgage payment if you guys are interested in you know paying
66% less on interest you guys are interested in possibly and potentially
doubling your income using this strategy go to chapman mortgage comm i'm going to
show you guys some real-life examples plus i'm gonna give you guys an
opportunity to interact with me on a phone or skype and you know we could
chat on how you can take this this illustration this concept and apply and
you're in your own life so go to chop my moves calm i will see you guys there i
will be waiting and and i'll see you in the next video alright take care now