ACCOUNTANT EXPLAINS How to Pay Off Your Mortgage Early (The Ugly TRUTH About Mortgage Interest)

00:00 Intro
00:59 How Interest Affects a Mortgage
02:38 How Much Interest is Actually Paid
03:18 How to Calculate the Mortgage Interest
05:36 Strategies to Pay Off your Mortgage Faster

Disclaimer: Note this video is not financial nor accounting/tax advice and should be used for entertainment purposes only. Consult with your own financial advisor, accountant and/or tax advisor for advice related to your specific situation.
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WHO AM I:
Gabrielle is a CPA and Tax Expert, as well as the founder of Balance + Wealth CPA, a licensed CPA firm that specializes in Tax. Prior to starting her business, Gabrielle worked as a Tax Manager at one of the Big 4 Accounting Firms for 7+ years, advising Fortune 500 companies. Gabrielle posts weekly videos on personal finance, business finance, and tax tips.
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[GabrielleTalksMoney]

What strategy would YOU recommend to pay off a mortgage early?

[cksh]

I am doing all 3 strategies! $1400 extra monthly lumpsum, regular weekly payments. and just recently increased my weekly amount by extra 18 dollars lol.

[null]

This is a very analytical accountant take, which I appreciate. However sometimes the more advantageous scenario isn't to pay off your mortgage early; Its to take the payments that you would have otherwise used to pay down principal and invest it into an ETF like VOO or SPY and within 25 years that money over the time would essentially be much higher than your starting balance.

[Tayllor]

So keen! My wife and I are 50k additional so far over 2 years and updated it again to 1k a week fortnightly recurring and the calculator says around 7-8 years until $0 😮 gives me so much motivation to keep smashing it out

[dmitryg]

The secret no one wants you to know how to pay off mortgage early: SEND MORE MONEY! 😂

[winniethepoohandeeyore]

Started overpaying my principal when the 1st was due in early summer 21, knocked years off the life of the mortgage in almost 3 1/2 years also every COLA we add another $10 a month to the payment, This Jan 25, we will be paying $50 more on a $126 a month principal, we have been paying far more towards in principal than interest for awhile now.

[Wongoo]

I wished you had shown the synergistic effects of using 2 strategies to see what it would look like. Still a fantastic and great video overall!

[stupedcraig]

Nice video! I was paying more into principal every month when my loan was at 4.25% but once I got it refinanced to 2.75% I pulled back most of that cash and put it into total market ETFs.

[poonekar]

I have been investing in QQQ for 22 years with an annual rate of return of 14.4%. The 8k I put in 2002 is today worth 150k. Using your example, imagine not paying down the 5% mortgage faster and instead putting that towards an investment like the QQQ. You would think you saved a few hundred thousand dollars in interest, but you would actually give up millions in stocks appreciation.

[kimberlyberry]

Awesome video just bought my house and have been making extra payments to the principal thanks

[JMaki-mrmh]

I explained to my 8 year-old daughter the difference between the avg yearly appreciation of our home versus the cost of the money loaned to us. Based on 30 year avg, we would lose money if interest is above 5-6% and gain money if it is below. Most years, you will earn money on real estate.

Having a mortgage isn't a bad thing as long as you are making good decisions with your money. Having a home repossessed or being house poor is a lot worse.

Gabrielle has lots of great ideas on those risks and how to avoid those financial pitfalls.

First National has an option of upping pymt by 15%: we have probably used this option the most.

[christellehamon]

Great template . I agree with the previous comments. Would be great to get additional simulations to see the effects if we had 2 or all the 3 strategies . Maybe a future video ?

[tele]

Great video I don’t think people realize what they’re paying and how much they’re paying over the long run. I personally am doing a biweekly payment with an additional monthly payment for principal.. ❤.

[Lester-htwj]

Hi Gabrielle... Thanks for the video. Very informative. You have highlighted the HUGH amount of interest that we've been paying for our mortgage loan. This will really cause us to consider ways to pay less interest to the bank so that we can use that amount for better use. Thanks for sharing and your explanation is really clear and easy to understand for people who have little financial knowledge.

[jwuhome]

It really depends on your interest rates and if you can get better return from your extra money. Then you can decide paying off your mortgage early really making sense.

[RichardGeorge-pzwm]

Purchase (2) modest investment rentals. (I own 4.) It is a part-time hands-on business and a ticket to a comfortable retirement if you are willing to deal with the headaches. I buy clean low-mileage cars in cash and I carry no balance on credit cards. I "retired" 10 years ago and my portfolio is worth more now (inflation considered). I will not outlive my resources if I live to be 100.

[lxx]

Well done! I could have used the spreadsheet model you created and ended up creating my own years ago, but I like how you added graphing and round functions in Excel. I am going to share this with others who could leverage this advice to plan their mortgage payments via scenarios models. Also second the comment about the weekly option, and perhaps how "accelerated weekly" and "accelerated bi-weekly" options impacts the overall interest paid over time. Another lens for you - is the ability to project a bit further based on 5, 10, 15 year mortgage renewal intervals, I think in some cases people don't model what an interest change impact might look like. Thank you for creating this video!

[mickelsonfamilyhomestead]

I can’t believe sometimes you can’t pay more then they would like you too or you get a penalty that’s insane to me!

[raulvelazco]

Loved this video and I will definitely be using your template.

[Lennoxrenol]

Great video! Thanks for breaking down the scenarios and even showing that there's no one true strategy to pay down your mortgage quicker. I'll definitely use this to determine when I own a certain % of my home and when I can stop paying private mortgage insurance.
Definitely subscribing for more of this type of content :)