How to Pay off a 30 Year Home Mortgage in 5-7 Years

18 Aug 2020

How do you pay off your mortgage faster in 5-7 years even its for example a 30-year mortgage?


1. Here is exactly what they do and how it works
- When you buy a house you a mortgage, as you keep paying mortgage you build equity on your home
- As the value of your home also goes up you also build equity in a way
- But the problem, the money you pay for you home, you cant use it whenever you want to ( and honestly you shouldn’t )

But what they do is this:
- Once they have enough equity in the house by paying and also an appreciation
- They take out a HELOC: that is a Home equity line of Credit
- So imagine if you bought a house for 200k and you paid off so far 40k and it went up in value by around 20k ( that’s 60k in equity, and your HELOC lets you borrow up to 80% of that)
- So you basically get a loan of $48k ( aka a Heloc) – and you can pay it off in 10 years

- Right now the rates for a Hiloc are around 5.17% but can vary depending on the economy, and go up to 9-10% you never know
- And right now a lot of banks offer a HELOC without an application fee, a closing fee or any fees honestly
- But why would you do this and what do you do with the money

Here is how it works:
- You would grab that 48k and put it towards your mortgage to lower the amount of money you and also the amount of interest you pay because the balance is a lot higher
- But you are probably thinking I still owe 48k on the HELOC at a higher rate, well yes but here what you would do to help you with that
- The idea, every time you get paid to put all the money into the Heloc, you use a credit to pay for you all your bills ( they give you 23-30 days to pay without any interest)

Here is what happens:
- Because your full salary is the HELOC, and you leave it there for 30 days the interest is going to based on that balance
- Before the credit can charge you interest you pay it in full with money you take out the HELOC
- That way you avoid credit card interest and also have a lower interest due on the Heloc because you left he money their

But there is one thing you have to know:
- This only works if you spend less than what you get paid ( make 4000 and spend 3000 including the mortgage)
- That way when you pay off the Credit card and the mortgage, you still have $1k being paid to the Heloc to pay it off fast

Tip: if you have a fancy credit card, you also get points, if you put all your expenses on a credit card It will begin to add up fairly quickly

2. SO overall:
- The idea behind this strategy is a smart way to pay of your debt faster
- By making extra payments and leverage the interest rate and also making money from points
- But as you can tell it can be very complicated to actually understand

Simple Step by Step :
- Get a HELOC
- Put the money into your mortgage
- Put your salary in the heloc and use a credit card to pay your expenses ( wait 30 days before paying the CC to save on interest )
- And rinse and repeat

But the problem is:
- Interest rates on HELOCs are not fixed they can vary and go up as high as 9-10% even more
- And top of that if you make a mistake and lose your job or something, then they have lean again your house ( they can foreclose on your )
- If you have a bad credit score, you most likely won't qualify for a good lender and will get hit fees for opening, closing and even maintaining the account open
- And for some people, they use the money to buy something and just end up having a double loan

3. Would I Do it
- the answer is now unless you can handle this form of budgeting
- for me a rather make extra payments.


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