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Be smarter than the bank. Don't pay off your mortgage early

7841 ratings | 1043046 views
Levi talks about why he won't pay off his mortgage and asks "Who do you think benefits from you paying off your mortgage early?" He runs some different scenarios and compares who makes the most return on their money comparing both early repayment and full term scenarios. Levi's is not a finacial planner and is not offering investment advice. This is an opinion channel only and you are encouraged to seek professional finacial planning advice. He is long in all of the positions listed in this video.
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Text Comments (2999)
Drawbridge Finance (6 months ago)
I made an updated version of this video that is way better. Watch it here: https://youtu.be/12pDWb_u2Jg
Ahmet Ali (1 month ago)
+accountant guy but I agree that the video is more about investing your surplus income vs paying that same amount and hoping to be financially better off many years later
Ahmet Ali (1 month ago)
+accountant guy thanks for responding. one extra payment at start of year creates a lower balance for the rest of the year. 26 half monthly payments create an extra one month payment which accumulates to a lot of interest savings. It still essentially equates to paying one whole month from your pocket spread over bi-weekly payment schedule.
accountant guy (1 month ago)
If you pay bi-weekly, the benefit is that for half of each month, your mortgage balance is lower, and that helps a little bit with lowering your total interest in the long run. There's nothing wrong with splitting a monthly payment into 2 bi-weekly payments that are about half as big. This video is just advising not to be too aggressive, such as by doubling your monthly payments.
Ahmet Ali (1 month ago)
Hi. bi-weekly payment available with my mortgage provider. I paid one whole month extra at the beginning of the year and continue to pay monthly. I'm pretty sure it creates the same amount of years saving as bi-weekly payment schedule
accountant guy (3 months ago)
This video is NOT misleading at all, and paying down debt does not *always* make more sense. I have a video which shows the math a bit more simply, as well as the income tax effect which, for most people who pay income tax, makes the mortgage payments even *less* worthwhile. Then again, both of this guy's videos explain it very thoroughly, and with pizazz. Do the math, people. Don't just repeat over-simplified advice that your parents and grandparents said to you, since they lived in a different era, when interest rates were way higher, incomes were way lower, and the retirement tax shelters may not have existed yet. Think of it this way... what benefit would this guy get by lying? Also, if he was trying to trick us all, why would he show all of his calculations? All I'm saying is to look into it further, do the math, and talk to a financial advisor that you have arranged to represent your interests via a "fiduciary duty".
Johanna Reyes (2 days ago)
This video should be banned... I feel bad for anyone who actually thinks this is the best way... by paying $300 extra every month towards my principle I'm saving $100,000 in interest and paying it in 10 years.. plus I have some stocks on the side...this video is the stupidest video I have seen. I can't get my time back!!!! Ughhhh
Drawbridge Finance (1 day ago)
Thanks for the comment. Hopefully you find some of my other videos to a be a bit better.
Collin Saxon (2 days ago)
How much did each lose to interest by not paying down principle?
Drawbridge Finance (1 day ago)
You should watch part 2 of this video. I go over it in more detail. https://youtu.be/12pDWb_u2Jg p.p1 {margin: 0.0px 0.0px 0.0px 0.0px; font: 12.0px 'Helvetica Neue'; color: #454545} span.s1 {color: #e4af0a}
Dave Thomas (5 days ago)
This guy must work in or get paid by the financial industry. Remember all the wonderful things that Wall St and the financial cabal. Do not listen to his advice.
tab let (8 days ago)
Even with lower interest, the total 400k mtg cost over 25 yrs is total nearly 800k, firm. He's not including the total interest over the 10 to 25 years. Alice s portfolio is actually a 25k *loss. The investment returns are likely but a risk and those of us who were adults in 05 know how many people using heloc s to"pay less interest" with that screwy facebook scheme were screwed when the banks called their credit lines in. NO one expected that the banks would call those credit lines in overnight, and so ended up losing all that mtg money in foreclosure. Also this guy forgets that paying the mtg. early gives more equity from the house. what houses are worth 20 yrs later is much more than what it cost with 10 yr old money. The house isnt just your biggest purchase, its your biggest investment with the lowest return risk. If you pay less interest by paying off sooner, then you have more selling power and leverage in housing slumps when everyone else can't sell or liquidate because they're upside down on their mortgage because the market tanked.. and it will again. NO this guy hasn't a clue on the risk level of his idea. Even when the market tanks, you can sell a paid off house. This guy has no concept of risk or capital leverage and lives in a fantasy world where no one gets sick, the market funds don't cycle down and no one gets laid off from their job.. not real world think through on this one. But I do have to say, if you're going to move within 4 yrs, it's more likely to be a successful plan .
Drawbridge Finance (7 days ago)
The interest is included in every payment that was made. Watch the video again.
Ayinde Abiola (8 days ago)
Damn that’s a game changer
Imatter Udont (9 days ago)
And that’s why your broke 😂
steve b (9 days ago)
Comes up for renewal?? STUPID!!!!!!!!
Drawbridge Finance (7 days ago)
Welcome back.
Philip Trimble (10 days ago)
Does tax come into these amounts plus inflation, This usually means that money is worth much less than when you started, not trying to be a killjoy, some aspects to also consider, I think when playing the money game. Some good strategies here Levi thanks.
DeirM Francis (12 days ago)
Pay it off...donate and travel...
steve b (13 days ago)
THIS is NOT a binary decision, DUMBFUCK!!!!!
Drawbridge Finance (13 days ago)
I agree. That’s why I only used $5500 in the example. A person could afford the presented scenario could easily use money above the $5500 to pay down their mortgage.
T C (17 days ago)
Theories like this one has USA with 21.6 trillion debt and almost sinking
Drawbridge Finance (16 days ago)
It true that debt can consume all of your profits if you are not careful.
enssupplement (18 days ago)
Guys pay off your home if you can. Is risk-less compare to investing in the market that has risk. Nothing compares to the feeling of being a true homeowner and knowing that you own your asset. The only ones that get rich are the banks and the investor for the next 15 or 30 yrs if you don't pay it off early. Yes you could invest in the market which is one of the ways to create wealth but you can do it a lot faster with no debt.
Drawbridge Finance (17 days ago)
Please do the math and send it to me to prove that. You will find your statement is incorrect.
Oregon's Lonewolf (19 days ago)
I think everyone is forgetting the amount of money you are paying out in interest over the course of the loan. You aren't really making more money.......do the math. Follow BOB. Operate a business out of your house for your tax write off when it's payed off.
MILLS CHRISTOPHE (23 days ago)
Enjoyed your videos - so thanks. But how do I invest like Alice ? I would be interested in learning / knowing how. Thxs
Drawbridge Finance (17 days ago)
Look for the playlist ‘14 rules that made Levi rich’.
jealvear (23 days ago)
One needs to also consider the total amount of principal and interest paid and perform net present value of all cash flows to determine best strategy.
Drawbridge Finance (23 days ago)
Absolutely!
algon44 (29 days ago)
Soooo keep paying interest, no thanks. The sooner you pay it off, the less in interest you pay, the more you save, Simple. You're wrong bro, you probably work for a bank. People please don't listen to this crap.
Buster Hymen (30 days ago)
This guy only made this video so he could say that he has enough money to pay off his mortgage at any time...
abri0297 (28 days ago)
lol
Drawbridge Finance (29 days ago)
You nailed it. Thanks for the comment.
Randy C (30 days ago)
Wikipedia says that a TFSA is only available in Canada and South Africa. So this is all crap for US. How about just pay off home mortgage as quickly as possible and then keep putting the same amount in a savings or RothIRA?
Drawbridge Finance (30 days ago)
Roth IRA is almost the same as a TFSA. Same principle shown in this video applies to a Roth IRA.
Jamor (1 month ago)
Payoff your mortgage and just save $$$ you will be surprised how little $$ you can get by with when you retire, don’t need as much as you think if you payoff all your bills before retirement
Drawbridge Finance (29 days ago)
I will agree that it is smart for most people to pay off their mortgage before they retire.
Davon Richardson (1 month ago)
What about the amortization of the loan... The interest of the loan would pull almost half of what the 7% has brought in... This is not good advice... Also why choose a low interest rate just to get the point across... This works because you have the money to pay off the mortgage should any emergency happen, not everyone has that available....I definitely disagree
Drawbridge Finance (30 days ago)
This situation only works when the mortgage interest is less than the investment return. Question for you: if an emergency happens would you rather have a small mortgage but no investments to sell or a larger mortgage but investments to sell off so that you can continue to make payments? Paying down your mortgage while making less return on your money actually increases your risk in two different ways.
Tushar Dadarwala (1 month ago)
does not make sense. I dont think you are taking the interested paid over the life of the loan...when you say...they "made" money. Take that "made" money and substract it with the interest paid over time. What is that value? Interest: "He who understands it, earns it ... he who doesn't ... pays it."
Drawbridge Finance (1 month ago)
I’ve calculated it before for one of the 200 or so people that are fixated on the interest paid. I’m sure you can find it in the comments. The interest has been subtracted from all of the investment returns so it is in the calculations Run the numbers in your own mortgage to see the real difference. I have already shown you how it effects fictional characters and their financials. Use the information to do the math and prove it to yourself that I am right. I really just want to help people to make better decisions and apply it when and if it makes sense in their individual situation. Let’s get rich together.
Tushar Dadarwala (1 month ago)
Drawbridge Finance I understand completely. My comment was regarding, the Total Interest paid...not just principle. What is the total interest paid by ABCD?
Drawbridge Finance (1 month ago)
I’m not sure you understand how a mortgage payment works. Part of the payment goes to principal and part goes to interest. All the characters paid interest with every payment they made. Alice definitely paid more interest over the term of the loan.
Connor Davis (1 month ago)
Your math is wrong lol
Drawbridge Finance (1 month ago)
true it is. sadly on a video that has over a million views. Lot's of other great videos on my channel that have correct math though.
Matthew Wilson (1 month ago)
Offset mortgages are the best. Save on interest payments,all funds instantly available, knock the hell off the mortgage term. I can't believe they do them.
you forgot about the interest that Ak]lice had to pay
Drawbridge Finance (1 month ago)
I did not. Interest is included in every mortgage payment.
Christina Duckett (1 month ago)
I prefer having my mortgage or any loan for that matter paid off as early as possible. On the other hand if i can find extra cash to put on my mortgage I would split it, some to my principle and invest (or save where am earning good enough interest) in a short term low risk investment, at the end of that time i can collect my interest, place in my rainy day savings and continue to invest if I so please. Getting something is better than nothing or loosing it all. Plus I save on the large sums interest as well thus saving me money.
śï×ÕfŇîņē (1 month ago)
best deal = live with parents + save 5 years .. then buy a house cash.. then max 401k and Roth IRA until retirement
Ernesto Salgado (1 month ago)
Your not Ludacris, he's black. 🤣
jafer2 (1 month ago)
and in the real world alice is bankrupt because she lost her job 10 years in when a market crash happened. All her investments were into to the negative and now she is homeless as she couldn't afford the mortgage payments. on the other hand bob was smart to pay off his mortgage as soon as possible, he refinanced at a lower rate from 2.7 to 1.29 saving him even more money in the long run. He now is mortgage free and bought into the market during the crash, doing so expanding his portfolio. 7 years later alice is in a life of crime and is on heroin and living the past dream of what her investment 'could of' got her. Bob on the other hand played his investment at the right time and now the market has picked up is a multi millionaire in shares that he is slowly offloading to be ready for the next crash. He is also living the highlife of being mortgage free for 7 years and now bought two houses that he rents out that bring in a further 5k a month.
Gee Dee (1 month ago)
Yeah... let me not pay my mortgage early. pay a shit load more of interest, and never making a dent on the principal.
Ironkitten83 (1 month ago)
jafer2 thanks I had the same thought
George Harris (1 month ago)
What is TFSA
Drawbridge Finance (1 month ago)
Don't know what a TFSA is? I have a video for that https://youtu.be/WYZqrOnp7fo
Yogesh Shidhaye (1 month ago)
If u r not owning a house in a big city its quite likely that its value will actually decline over time so its not really an investment per se it is just a convenience so dont take too much stress paying it off. In any case till u become 45 invest more in stocks and then after that work on paying off mortgage. Traditionally house was biggest asset in future stock portfolio will be
Yogesh Shidhaye (1 month ago)
Invest most in stock related investment till u become 45 and then once u have solid base then payoff mortgage faster. Net net no mortgage beyond 17-18 years totol
Paul Koller (1 month ago)
This was stupid.
jean lenor (1 month ago)
Im against this video and you know why? Because if i paid off a 400k mortgage early in like 7 years, i wouldnt do what these folks do. Id be way wealthier than these stupid people. Id buy an apartment building that would cash flow at least 4k/month by refinancing this house. Real estate is the way to fucking go NOT fucking hopeful 7% thats not even garanteed.
jean lenor (1 month ago)
+Drawbridge Finance Dude, do you have any idea of the power of the investment strategy that I just described to you. I only gave you a broad idea of how id invest it in apartment building.And that 4k/month i said is not even half of what i would make. If i were to sit down with you with my 500k and describe in detail what id do with it, youd be convinced that im in a far better place than someone who keeps paying the mortgage for 25/30 years. The refinance debt isnt an issue at all. What matters is how you use it. Look: You could find 10-20 units apartments selling for 500k all over the country. You get 10 to 20 tenants paying you 600 month. After mortgage, taxes, vacancy etc... you can cash flow anywhere from 2500 to 3000 a month. Imagine if you buy 4 of those buildings that are cash flowing 2500 month. Thats like 10k a month in ur pocket. Dude, im a real estate investor. I know what im talking about. Im only 33 and i will retire in 1 year using this same thing i described to you.
Drawbridge Finance (1 month ago)
you know what sounds stupid? I want to pay off my financing so I can refinance later at a higher rate. Good luck with that. That would be a fail in math class. Subscribe and learn. Let's get rich together.
jean lenor (1 month ago)
Who else is tired of this commercial?
Sean Wachtel (1 month ago)
This is insane advice and it is wrong. Do you work for a bank or something? Pay off your debt, then invest. Use any tax free allowances every year. Paying off the mortgage IS an investment - you get the interest you would have paid the bank PLUS any capital appreciation in house value. Brad Barber below has it right.
Sean Wachtel (1 month ago)
Dude - most people are not in the position you describe. Literally half of Americans earn less than $30,000. Your advice is dangerous for all but a very select few and even then only applies to those with secure jobs, which are few and far between when one makes that kind of cash. +Drawbridge Finance
Drawbridge Finance (1 month ago)
I am lucky enough to be able to invest and pay down my house at the same time. Most people would benefit from a strategy of a house pay down and investing. Which is why in this video I only used a calculated amount of $5500 for the investment. Far less than 15% of a household income that could afford a $400k mortgage. Admittedly not my best video. Hopefully you get a chance to see some of my other videos that have a better presentation of both sides of a scenario.
Sean Wachtel (1 month ago)
Nope, it appreciates less as you lose the equivalent amount of interest you are saving. But that is the time to invest - with money you can afford to lose; doing what you suggest is to gamble the roof over your head on the financial markets. +Drawbridge Finance
Drawbridge Finance (1 month ago)
does the house suddenly appreciate more when it is paid off?
James Fredrickson (1 month ago)
Always, Always, Always pay your mortgage off ASAP.
Drawbridge Finance (1 month ago)
You could pay your house off sooner by making money faster through investing. If that was your goal.
Thom4 xxx (1 month ago)
anyone who doesn't pay off their mortgage as soon as they can is crazy
Drawbridge Finance (1 month ago)
Crazy but with more money
Peter Pan (1 month ago)
Bull
Tejano37 (1 month ago)
Think about it, what business front load their interest? None other than Banks. You pay them interest of $900 a month and pay only $300 into the principal. No, you are wrong. Banks want you to hit the 30 yrs trail and hope you refinance to start your clock over..Banks loss money when you pay off early. Not sure where you got your info from
Drawbridge Finance (1 month ago)
I hope you subscribe. I am preparing a very interesting video that shows the math as to why the banks want you to pay off sooner.
MEGA NZ (1 month ago)
idiot advice
Drawbridge Finance (1 month ago)
I thought the same thing when I was first told about it.
Haymaker ubettalookout (1 month ago)
Fuck the tsfa and fuck the banks.. pay that shit off n 5 years..dont give the banks extra. Dont let them hold yur money
Drawbridge Finance (1 month ago)
Potty mouth! When I was in kindergarten I learned to count cats. 4 cats are more than 3 cats. Simple math would show you that having more money faster means you can pay off your loan sooner. Welcome to my channel, let’s get rich together.
Richmighty 1 (1 month ago)
I’m good. I’ll pay off my home first.
Drawbridge Finance (1 month ago)
For some people that is the best option. I personally, had the option of paying off my Home much sooner than most. Which is why I share my financial outlook.
John Clapp (1 month ago)
I get that he is pointing out there investments. But he is failing to point out the interest saved on the mortgages paid off sooner. These numbers would make this video more complete.
Drawbridge Finance (1 month ago)
Those figures are included in every payment. A portion goes to principal and a portion goes to interest.
mkkravist11 (1 month ago)
life in the real world or life on a spreadsheet- life has a way of fucking up your spreadsheet.....this is no.1 bullshit. Pay off your mortgage as early as possible, then pump as much as you can into a pension and in 5-10-15 years you'll have a wage if youre still working, no mortgage so a property you can sell if you need to release equity/downsize etc and a very nice pension.
Drawbridge Finance (1 month ago)
thanks!
P fields (2 months ago)
This is like telling a drowning person to just swim....
P fields (2 months ago)
+Drawbridge Finance Good sir, you're absolutely right but, unfortunately the masses will never understand Financial ideology, especially when there manipulated officially.... The system was set up to take advantage of the masses that's why they are the Sheep... thanks for the Video...
Drawbridge Finance (2 months ago)
The reason most people drown is because they didn’t learn to swim. Educate yourself.
terry waller (2 months ago)
It depends on your interest rate and your personal situation. A high interest rate your better paying off early, if your within 15 years of retirement your better off paying off early.
terry waller (2 months ago)
+Drawbridge Finance because when people retire their income drops a lot, and they need to use their cash flow for food and utilities.
Drawbridge Finance (2 months ago)
Why should you ever pay it off if the rate remains low?
Tenderleaf Village (2 months ago)
I want to be polite and tell you in a respectful way that your video and logic is all so so wrong in so many ways. I’m a season real estate investor and have made good money in RE. On one hand you should NOT pay off your mortgage, not for the reasons or examples you mentioned above, but for reinvesting and wealth acceleration purposes. On the other hand, if you can’t redeploy, then you SHOULD pay off your mortgage by utilizing the Line of Credit (or HELOC) method, to get rid of the amortization method , then immediately go back into debt and pull out another loan to redeploy. If what I’m saying doesn’t make sense or sound Contradicting it’s because there’s so much to explain. You should do more research at LEASE on the two mentioned strategy above. I wish you the best.
Tenderleaf Village (2 months ago)
Drawbridge Finance, yes, short answer. However, there’s a few pitfalls if not done correctly. 6% HELOC is fantastic, even at 20% HELOC it’s still a good method. You’re not comparing apples to apples. The 3% mortgage is amortizing, whereas the HELOC is simple interest. One of my buddies used this method and made/paid off $2M in 6 years from an RV park he bought, then pulled the equity out again to buy some self storages. He’s retired at 38 years of age.
Drawbridge Finance (2 months ago)
Thanks! My heloc is over 6% while my mortgage is under 3%. Does it still make sense to use a heloc for mortgage pay down?
David Pant (2 months ago)
Unless you are pretty much rich do not listen to this advice. This scenario is swayed and does not even consider other risks. The reason the bank tells you to pay bi-weekly or more on your mortgage is because they KNOW 99% of the people do not do this. What they really want is for you to refinance your house every 3-5 years and start all over paying interest. The banks are not your friends and being in debt to them is not sound advice imo! Btw. I used to be a mortgage loan officer then lost my job in 2009 because the whole market was going down. Pay your house off as soon as comfortable and live with much less stress knowing you have your own home for real.
Drawbridge Finance (2 months ago)
Thanks for your comment David. Many people benefit from paying down their mortgage. But it is always good to consider other scenarios. Hope you check out some of my investment videos as well.
hillz4ever (2 months ago)
Who has a 100k down payment?
Drawbridge Finance (2 months ago)
With a combination of working hard and investing it doesn’t take too long to achieve a 100k down payment.
SAVAGE BOii (2 months ago)
Don't buy a house that is 500k look for a decent home under 200k. You can thank me later.
Drawbridge Finance (2 months ago)
I wish that was true in my city. Land value of a 33’ x 120’ lot is over a million $.
Bo Swansen (2 months ago)
Well since the market has gone straight up for 10 years I think I will stop adding to my investment portfolio and now start paying off my house faster. Best of both worlds!
Drawbridge Finance (2 months ago)
There is definitely a time to reap the rewards of good timing. Good on you!
Daisy Jernigan (2 months ago)
What the fuck is this guy talking about every two years
Drawbridge Finance (2 months ago)
The renewal term for our mortgages in Canada can be from 2-5 years depending on the lender.
Alistair Smith (2 months ago)
With my mortgage I can pay 10 percent each year interest free. I've got an 11k debt which I plan to clear in a year and a quarter. Then I'm going to double my mortgage payment until the 10 percent rule applies. I'm will then pay into it as much as I can and save the leftover so I can one day clear my mortgage in the next 10 years. I'll be roughly 36-38 years old. Mortgage free. Then I'm going to save and buy another house to invest in with rental income. That's my plan and it sounds better than just waiting till I'm nearly dead to pay off my mortgage.
Musclman78TA1 (2 months ago)
1...when you paying the extra principal your saving by puting money away because if you sell the house down the road its your money....2 ..your gona pay less interest..3..no mortgage means youll live like a king..4...you can go work for less or part time..
Drawbridge Finance (2 months ago)
That’s exactly why I made this video. If you make money faster you can payoff your mortgage sooner.
Raphael Rivera (2 months ago)
First of all I dont know anyone that could buy a 500k house and put 100k down and I know a LOT of people. THOSE that do certainly dont need advice on not paying off a house.
Drawbridge Finance (2 months ago)
That’s exactly why I started this channel. So that everyone can eventually afford the house of their dreams. I hope you stick around:)
Jefferson Diaz (2 months ago)
How much has he paid on his mortgage at the end of 30 years tho?
Drawbridge Finance (2 months ago)
Less than he made investing:)
Kyle Victorino (2 months ago)
I got an ad about quickening my mortgage before this vid lmao
Drawbridge Finance (2 months ago)
Exactly. Because the banks want you to pay it down faster so they can leverage your money while maintaining the security of having an asset backed loan.
Richard Underwood (2 months ago)
A few of things come to mind. Firstly, it all starts with a very low mortgage rate fixed for only five years. The assumption made is that the 2.6% carries on for all 25 years. Never going to happen like that. At 2.6%, the only way is up. Also, if a more accurate fixed rate was used, for all 25 years, it would be a lot higher. Secondly, mortgage interest is tax deductible and this is ignored. This an have a significant impact on all buyers, and especially important to higher salary earners. One could take the tax savings and invest those at 7% also and get a much different outlook.. Thirdly, if you can get a steady 7% return on investment, and a 25-year mortgage at only 2.6%, take a 100% mortgage and invest the $100,000 down payment ( eliminating opportunity cost). Lastly, poor Doug! With a 0.5% interest rate for 25 years, even a modest average rate of inflation of 3% would mean the real value of his savings would be approximately only one third (the time value of money). No point in saving at 0.5% interest rate with inflation at 3%. Better just to spend it at the time and have some fun. This is the problem with simplistic YouTube videos offering advice. The real world is much more complex.
Drawbridge Finance (2 months ago)
It is hard to predict mortgage rates and I agree they will go up for sure. 25year Fixed rates are not available in Canada. Also in Canada our mortgage interest is not tax deductible. If our down payment is less than 20% of the Home value we have to get our mortgage insured and it is builded at a higher rate. This usually offsets the cost benefit. Really the point of this video was to show that Doug makes a poor decision by investing in 0.5% investments. Definitely not my best video to date. You obviously know more than most people about how numbers work and should probably check out some of my more advanced videos on option trading. Thanks for the comment.
TROLL MMA (2 months ago)
Your talking about all these things that sound like another language to me
TROLL MMA (2 months ago)
What the F is a tFSA . I dont have any idea how to invest other then the safe was because I know a little about it its safe . I know nothing about investing other then a house
Victor Abraham (2 months ago)
Lots of great points in the viewer comments. I agree with the calculations and will support you in the notion of keeping the scenarios level and simple. What I will disagree with is that you mention that “the banks” want you to pay down your debt faster. I would argue that’s categorically counterintuitive to most banks’ guiding principles, which is to satisfy shareholder value. The more interest they can collect and for longer, the better. Some banks are rolling around to the idea that clients paying down debt is good for the shareholders. It leaves more capital there for investing or purchasing a rental property, etc... In your scenario it’s also important, more than ever to factor in a rising interest rate economy as that is what we’re facing. I like that you mention your example works in a low interest rate market such as what we’ve seen in Canada over the last decade. Valid and key point, but I do think it over simplified the case. There is merit in having a professional look at all the moving parts such as, property value appreciation over a 25 year amortization. There are other potential lifestyle factors too. In a low interest rate market it makes tremendous sense to take a chunk out of principle by paying down to insulate against potential rate increases, job loss, disability, etc... In the end there are many other factors that just the savings and who has more at the end.
wouter Groot Wassink (2 months ago)
So this makes no Sense at all
Drawbridge Finance (2 months ago)
Sorry to hear.
wouter Groot Wassink (2 months ago)
Its Nice to hear but when You R just a production worker and making 26000 on yearly base ...its not interresting to be paying for the rest of you re life...I had also a morgage of 5.45 % over 125.000 ...in 10 years with this rate every month i must already have paid half of the home only interest not paying of anything ...now after 10 years i could refinance the morgage for a lower percentage of interest....but on the other hand ...if You don t have enough financial space to spawn money every month to Pay of the Loan You made in the beginning ...it takes a lifetime getting it paid of over 2 or 3 times
JonathanE (2 months ago)
On a 2% mortgage on a $200,000 , you pay £54,357 interest over 25 years.. That goes straight into the banks pocket... Why would you not save yourself paying that interest??
JonathanE (2 months ago)
I appreciate the video and maths, but none of these scenarios match your situation.. ie paying off your mortgage completely.. early :)
JonathanE (2 months ago)
The banks want you to pay interest.. that is all.. I love the maths but none of the scenarios match your situation, ie.. having someone paying off their mortgage early and then saving in a high interest account..
Drawbridge Finance (2 months ago)
To make more money
0218 L (2 months ago)
Sometimes people like the feeling of being debt-free.😃
Drawbridge Finance (2 months ago)
So invest and payoff your mortgage sooner.
Anthony Larsen (2 months ago)
Interesting video Levi. Numbers don't lie but as many of your replies refer to, hard to quantify ones risk tolerance. This is why "what makes sense on paper, does not necessarily make sense for you". Doing what you propose requires a level of risk tolerance many Canadians simply don't have - good investment knowledge and better cash flow is often in short supply amongst the average Canadian.
Drawbridge Finance (2 months ago)
so true.
Chris Mohrbacher (2 months ago)
1- Simple math. If you can get something with a higher APY than the APR of your debts... make minimum payments and maximize the cash you have in the higher APY. You'll make more money than you'll lose. Anything with a higher APR than your investment's APY should be prioritized to be paid off because by investing, you're losing the difference in those fees. (I.e. if you have a 7% investment available, and can take a 5% loan to make it... you'll make a 2% profit. If you have to take a 12% loan to make it, you're losing money. 2- Risk vs. Reward. I'd like to see how easy "guaranteed 7% return investments" are... because I'm not aware of any. Anything higher than 2-3% generally tends to "suggest it can earn up to x% typically, over time" ... but sometimes it'll gain 10%, and other times it'll lose 20%.
Drawbridge Finance (2 months ago)
Great comment!! I love simple math. Here is the video that answer point 2 for you: I made this really interesting video that shows how the markets have 7% or greater returns over long periods of time: https://youtu.be/7oPmnfoIuwE
votaric (2 months ago)
Pay extra towards principal and build equity. Thats money in the bank growing faster if you keep your house in good shape.
Drawbridge Finance (2 months ago)
You are incorrect. If your investments make more than your interest rate that will make you less money paying down your mortgage. Feel free to to respond with the math to back up your statement but I assure you that you cannot.
Joe Cole (2 months ago)
Exactly!
Frank Vorlicek (2 months ago)
THis is silly. How can anyone earn 7% without any risk??? Also, there is no way that Doug has more money than Charlie. Paying the mortgage is equivalent to getting a risk-free 2.6% return.
Drawbridge Finance (2 months ago)
By your picture I would assume you are old enough to remember the housing crisis of 2008 and the dot com bubble burst and probably even the 20% mortgages in the 1980's. In all of that time have you ever heard of Warren Buffett? Inflation last month in Canada was 3% year over year. The average stock market return is 9.4% year since 1926. With inflation calculated in that still works out to 7.8% average a year. To only get 7% a year you would have to below average. Paying down a 2.6% mortgage is silly. Please, please, please watch some more of my videos and then show them to the young people in your life so that they have a chance to make some money. Let's get rich together. BTW, I made this really interesting video that shows how the markets have 7% or greater returns over long periods of time: https://youtu.be/7oPmnfoIuwE
Rod Clark (2 months ago)
You will never regret paying off a mortgage.  I don't care what this genius says!
Drawbridge Finance (2 months ago)
so invest and pay it off sooner. the math doesn't lie.
Tony Hightower (2 months ago)
You didn't figure in Charlie paying off the house early saving him 1811 a month for 7 years. What did he do with the 152,124
Drawbridge Finance (2 months ago)
It was included. He invested it and tried to catch up. The math was not in his favour.
James Robinson (2 months ago)
It's something to consider. Thanks.
Michael Lee (2 months ago)
This model assumes mortgage rates will be at 2.6 % for the next 18 years! This is the very definition of wishful thinking.
Drawbridge Finance (2 months ago)
The case it very different as rates change. Which they do. A high rate mortgage is great to pay down.
Dave Meraz (2 months ago)
Uum really? Have you ever looked at an amortized schedule? You're leaving out that the person we who paid motgage of first probably saved 50k in interest. Plus that person also has the complete value of the equity plus their savings, you many be good at math, with side blinders on bud. Not good advice.
Drawbridge Finance (2 months ago)
Many times. This is a direct comparison between and amortization schedule and a compounding dividend investment portfolio. The math does not lie.
Mr Gilmore (2 months ago)
You're forgetting to factor in risk of a stock market crash. If the market crashes, not only do you lose money in stocks, but you also didnt use that money to lower what you owe on the house.
Drawbridge Finance (2 months ago)
You only lose if you sell. My portfolio dropped 40% in 2008 and I lost $0 because I didn't sell.
Jaughn Deau (2 months ago)
If u arent offering advice and are not a financial advisor, stfu and quit misleading people with your opinion.
Drawbridge Finance (2 months ago)
The math doesn’t lie.
J_A (2 months ago)
You presented a problem from the go. "We are going to assume interest rates are going to stay at 2.6%". That's just not real life. They were reaching 16% in the 1980's. You haven't taken into account this kind of data. Also, you've not considered risk tolerance. Yes, you could pool all your life savings into a 7% yielding stock portfolio but that comes with significant risk and can bite you. You could argue that while stocks are at record highs and bond yields are so low, there is no better time to pay off your mortgage.
Drawbridge Finance (2 months ago)
I do not assume that. If my interest rate were to rise to 5% I would pay off my mortgage:)
LynRuiz (2 months ago)
This doesn’t apply to most Americans. I know few people with and APR under 3% without a credit score or 750+ which is prime. If this was accurate for most there wouldn’t be FHA and USDA loans. Also, most American don’t have $100k saved to put down on a house.
Drawbridge Finance (2 months ago)
True.
Christopher Banacka (3 months ago)
alot dave ramsey fans in here hah
Drawbridge Finance (3 months ago)
Including myself! This is right in line with Dave’s thinking! Invest 10-15% of your income before you pay down your mortgage.
Curt G (3 months ago)
Why would you not want to. You end up paying the bank about twice what you bought the house for, so if you can i dont see why you wouldnt...
Drawbridge Finance (2 months ago)
Because in the end I have more money. That is the end goal.
Jim Matrix (3 months ago)
Perfect world assumption. Assumes investments are doing great for 25 years.
Drawbridge Finance (3 months ago)
I made this really interesting video that shows how the markets have 7% or greater returns over long periods of time: https://youtu.be/7oPmnfoIuwE
L_J (3 months ago)
thank you i like the scenario's very good video
alvin miller (3 months ago)
I never understood who picks the value of a house on a house LOL I bought a hud home outright put $10,000 into it now it's worth 150 k, I believe mortgages are a trap from the jump you don't truly own your house until it's paid off and I live in the suburbs LOL
Paul Ciamaricone (3 months ago)
how do I find somewhere I can starr putting money in with a dividend
Drawbridge Finance (3 months ago)
Check out this video where I show you how to set up Yahoo Finance Screeners: https://youtu.be/ijMM2HPQ2XE
SBVCP (3 months ago)
Awesomely explained. And yes, people think that high returns (sorry for bad english) is imposible, but you have to understand, no matter how much they give you, because you are not first hand (neither on returns or risk) they are goign to win a lot lot more. However, this is awesome for normal people. I personally, altho i dont know that much about investment, think that, the "ladder", the first hill until you can invest confortably in whtever you want, should be thought at 5 to 10 years maximum Could you make a video about that? high risk quick investment?
Jerry Contreras (3 months ago)
But what about all the interest they paid for staying through the whole mortgage term? This video is just gonna confuse every other strategy to avoid paying all that interest to the rich. That's why only the middle class have mortgages and still pay more taxes at the end of the year.
Sigma Tau (3 months ago)
...comparing apples with oranges, you should have held interest on investments constant so that the only variable is payment periods.
Drawbridge Finance (3 months ago)
This video has nothing to do with paying a mortgage. The payment periods don’t effect it enough.
Joe Cole (3 months ago)
U didn't take into account of capital appreciation of the house.
Drawbridge Finance (3 months ago)
It is equal for all characters.
Jimmy Johnson (3 months ago)
Stupid advice
adrian singh (3 months ago)
What did the idiot say? Not to pay off your mortgage ? It depends on how you pay off your mortgage . Didn’t mention that .
Drawbridge Finance (3 months ago)
Glad you watched, glad you commented. The rudeness is not appreciated but stick around anyhow. I want everyone to get rich, including rude people.
ChrisEngle87 (3 months ago)
TFSA is canada only right? so this doesnt apply in US?
Drawbridge Finance (3 months ago)
Correct. But it is just a type of account. Americans have Roth IRA that are very similar. It’s the investments that you make within in the accounts that matter more.
Sulayman Banian (3 months ago)
The BIG question would be, how much are they paying total for the mortgage.
Sulayman Banian (3 months ago)
it's simply this each person will pay the 500,000 + interest, that interest can also be added to the pot, plus the bigger issue especially in the US is having a job that long. with the health care mandate, many companies went to part time as a default, got rid of workers who had seniority to pay new workers less, minimum wage going up meaning the government gets more in taxes, the price of goods goes up to compensate, and the overall buying power of the working person goes down. Meaning it's not safe for a person to have any long term payments/mortgages, especially when the US is so close to another recession where people lose jobs= no money= no money= repossession and loss in any equity that has been payed + the possibility of losing the investment to cover that debt, and you will not own the property..... makes no sense ..
Drawbridge Finance (3 months ago)
Why is that the big question? Who has more money? Someone that pays $10 dollars to make $10? Or someone that pays $20 dollars and makes $100?
Robert Fustin (3 months ago)
On a 30-year mortgage you pay a minimum of 3 times what the house is actually worth. If you factor in the taxes and maintenance and everything else on the house you can't possibly sell the house for more money than you have invested in it. Just how in the world does that make sense. At least get rid of the mortgage fees do you still have the taxes and the maintenance to keep up the house.
Drawbridge Finance (3 months ago)
By making money faster, I can pay off my house faster.
Billiam The Great (3 months ago)
Call the Dave Ramsey show and tell him this ... you will be laughed at and smacked down as you deserve. This is shitty advice
Drawbridge Finance (3 months ago)
Actually Dave and I agree on this topic. $5500 would be well under the 15% income threshold for any of these characters. Dave always says to invest 15% of your income and THEN pays down your mortgage.
Joseph Glenn (3 months ago)
Boy, you sound like a damned fool! Take this video down ASAP
Cookie Monster (3 months ago)
Common sense died in America.
Motown YB (3 months ago)
Pay mortgage off first and you can invest in other ideas later bro. You can also invest while your attacking that mortgage
Steven Chen (3 months ago)
if you're nowhere near top 20%, don't pay off your mortgage early. Reality is Stock Market will always outperform your mortgage rate unless you're in one of those crazy 7%+ loan. Some people argue that stock market has a lot of risk & it's a gamble, but trust me when i tell you, if market is going to crash, your home isn't likely going to be safe anyway. your house value on market is likely going to be a lot less than how much you bought it for. lol... always go with a diversified index/etf instead of paying off mortgage early. if you're in the top 20%, then it's different, because you're unlikely going to put all your cash into a market where you're already financially well, then you may want to place some cash into mortgage rather than sitting in the bank(letting inflation eat it).

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