How To Payoff Your Home in 5 Years

I see Videos Daily on how to “Payoff Your Mortgage In 5 Years”.

I have been in the Mortgage industry for 30 Years and I have not been able to pay off my Mortgage in 10 Years or even 20 Years.  SO I finally decided to watch several of the videos and also read as many articles as I would for my personal use and also as a tool for my Mortgage clients.

 

 

 

 

 

 

Is it Possible to pay off your home in 5 Years or even 10 Years?   YES

Is it Realistic?  NO

So let’s go over what 99% of the advisors will tell you and then let’s go over some Realistic ways to get your Mortgage Paid off in LESS THAN 30 Years.

  • They will advise you to do is to take out a 15 Year Mortgage.
  • Apply Extra Principle Payments Monthly.
  • BAM…………..Your House will be paid off in 5 Years

Now for REAL LIFE:

Let’s look at how much a typical family earning $60,000 can afford on a 30 years Term -VS- 15-year Term

My numbers are going to assume a few things:

  1. Other debt of $400 a month.  This can be a car loan, credit card payments or student loan payments
  2. Real Estate taxes of $4000
  3. Home Owners Insurance of $1200 a year
  4. Conventional financing with a 47% Debt Ratio.  Debt Ratios is your (Expenses / Monthly Gross Income)  MAX Payment to qualify would be $1936.
  5. Mortgage Interest rate of 5%
  6. 20% Down Payment

Breaking down the numbers to see how much you can afford at the 47% Debt Ratio

  • $60,000 a Year in income comes out to $5000 a month in Gross Incom
  • Real Estate Taxes $334
  • Home Owners Insurance $100
  • Other Debt $400

 

 

 

 

 

 

Qualifying with a 30 Year Term:  You would be able to qualify for a $280000 Loan amount.

Qualifying with a 15 Year Term:  You would be able to qualify for a $190,000 Loan amount.

 

How much would you need to pay extra on the mortgage to pay off the home in 5 years:

 

 

 

Using an Amortization schedule above:

You would need to send in an EXTRA $2,100 a Month toward your mortgage payment.  This would bring your total mortgage payment to $4,036 a month.

If you are capable of making this $4,036 payment, this is GREAT NEWS.  The average person making $60,000 paying 25% in taxes

When I am consulting clients on ways to pay off their homes years early is by consolidation other debt:

By consolidating credit cards and other high-interest debt is the BEST WAY to pay off your mortgage early.

Your monthly credit card payment comes to $1000 a month and you owe $20,000.  By paying off these accounts you will no longer have the $1,000 a month in credit card debt.  The extra $20,000 added to your mortgage would increase your payment by $592.  This means the difference of $408 ($1,000- $592) would go directly to principle.

Regulatory Information: Nationwide Multistate Licensing System's Consumer Access Website" (www.nmlsconsumeraccess.org), Premier Financial Services, Inc. NMLS #266214. The State of Illinois | Division of Banking located at 100 W Randolph St, Chicago, IL 60601 (312) 814-4500 | NMLS # 266214 Dan Frio NMLS 246527