231 - Synchronized Clip
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[00:00:00] Welcome back to the What's Your 1 More podcast. I'm your host, Quinton Harris. You're dialed in for episode [00:00:05] 231, and on this episode, there's a couple things I want to talk to you about, you know, last when we kicked off the year with PMI savings [00:00:10] and how you could reduce the PMI on your mortgage payment, and we gave you the exact recipe how to do that with [00:00:15] multiple options.
[00:00:16] Feedback on that episode was so good, I decided to step into another [00:00:20] mortgage hack, if you may. You know, with these high elevated interest rates that people have been acquiring since [00:00:25] Q4 of 22 and Q1 of 24, I decided, hey, here we go. How [00:00:30] can we help people lower their interest rates and save money on their loan?
[00:00:34] But get [00:00:35] this, without having to refinance. So if you bought a home and your interest rate is above [00:00:40] 6. 875 This episode's for you. So hey, welcome back So[00:00:45]
[00:00:49] [00:00:50] as I spoke earlier in the intro, like I really am making a point of emphasis to say How do we bring value to our [00:00:55] audience? How can we help you guys do some things right now when the rate market necessarily isn't in our favor? Like we've been [00:01:00] talking about it's coming and i'm a firm believer It is we did an entire episode as to why but what I want to [00:01:05] pinpoint on this episode is What can I do to help you save money right now?
[00:01:09] That doesn't [00:01:10] cost you Additional money meaning you're not going to pay someone to do something for you. Yes, you could go refinance [00:01:15] Yes, you could take points and buy it down But as I said, if you bought a home in the last two years [00:01:20] last two and a half years You're probably sitting somewhere between a six eight seven five interest rate and maybe even an [00:01:25] eight percent Maybe you refi it out of the eight.
[00:01:27] Maybe you have it. Maybe you've got something in the sevens [00:01:30] It just doesn't make sense, right? We've talked about that notion of making sense. So here's another thing [00:01:35] I'm also talking to you people that are in the lock in effect, right? The people that I've been saying, Hey, listen, here's this lock [00:01:40] in wheel.
[00:01:40] They've got these low interest rates, anywhere from a 2 percent all the way to a 5%. [00:01:45] I'm talking to you as well. But the point of emphasis for this is driven home to the people that want to refinance, [00:01:50] but it doesn't make sense for them to do it right now. Right? So one of the things I learned back in [00:01:55] 2008 when interest rates got to that pivotal 6.
[00:01:58] 75, 6. 5, no one [00:02:00] wanted to refinance. Uh, matter of fact, It's not that they didn't want to refinance, they didn't have the [00:02:05] equity to do it. That's what I should say. Leads were never a problem, man. We had people calling all day long wanting to refinance, but they [00:02:10] were upside down in their homes, right? So, we would do an appraisal, value would come in at X, loan amount was [00:02:15] at Y, and Y was like 30, grand higher than X, right?
[00:02:18] You just couldn't do anything. [00:02:20] And it was a real crummy time to do refinances. So what we kind of worked on was teaching those [00:02:25] individuals say, Hey, listen, if money's not an option because during that time money was an option and [00:02:30] it always is don't get me wrong about that, but I mean like the struggle was real in today's world.
[00:02:33] There's some struggles, but [00:02:35] it wasn't comparative to that during that time. So one of the things we coached people [00:02:40] on was that, Hey, listen, if you can make any type of extra [00:02:45] payment to your mortgage, you can bring that rate down. Now going back to that time [00:02:50] period, looking where we are today, I'm constantly talking to consumers.
[00:02:53] I'm constantly talking to people that are [00:02:55] like, if the rate is this, and we talked about if it's like six, six and a quarter, people are going to [00:03:00] move, people are going to refinance because they'll use the, you know, the adjusted point system on discounts to [00:03:05] get down the fives. They're going to feel good about themselves.
[00:03:06] They're going to refinance. What if you could do something [00:03:10] now, and you don't have to worry about that time coming until it gets here, right? What if you could [00:03:15] effectively do something now? Now, one of the things you have to consider in this conversation that we're getting ready to have is, [00:03:20] Hey, do you have any disposable income that you're aware of that you could [00:03:25] use?
[00:03:25] Now, I find that term interesting because a lot of people go, Q. Hey, listen. Stuff's [00:03:30] tight right now as it is like I would love to get the equity out of my home or hey, listen, you know We're we're [00:03:35] stretched thin right now between just life, right? There's just no extra room. So think about this It's [00:03:40] tax season is approaching now One of the things I like to say is that as tax season approaches I [00:03:45] never count nor should you count on a tax return as a part of your income like it should not I know that's hard To think about because [00:03:50] a lot of people go.
[00:03:50] Oh, hey, it's a bonus I'm going to use it but like think about it as this strategy and it's [00:03:55] something that I started adopting probably about 10 years ago, and I started encouraging people to do it [00:04:00] as you file your tax returns. And you know you're going to get a return, right? If you know that, right? [00:04:05] Go ahead and start budgeting a portion of that return towards your mortgage.
[00:04:09] And I [00:04:10] know that sounds odd, but it's amazing how you can actually control your [00:04:15] own interest rate on your home, as well as the interest that you're paying your lender. by [00:04:20] just making a little bit of extra payments. So on my screen here, [00:04:25] um, and my producer will pull it up and if you're watching this on YouTube or at what's your one more with the number one, that's at what's your [00:04:30] one more with the number one.
[00:04:31] My screen is going to pull up here and what I'm going to do is I'm going to create a mock [00:04:35] mortgage, right? And what I mean by that is I'm going to pretend that this is a mortgage amount at 500, 000 since [00:04:40] that's roughly the average mortgage, um, in our area. 500, [00:04:45] 000. Uh, I'm going to say it was a 30 year mortgage at a 7 percent interest rate.
[00:04:49] And I'm going to [00:04:50] say time remaining on this mortgage was Essentially 29 years right 29 years [00:04:55] remain. So it's year one in this mortgage. I've only made 12 payments But what I want to do is that my [00:05:00] current payment with my piti on this property is about three thousand three hundred and twenty Six dollars because I didn't put [00:05:05] much down on it, right?
[00:05:06] And so what I want to do is how much can I [00:05:10] apply? to this and still feel comfortable. So in this scenario, I'm going to apply a hundred [00:05:15] dollars extra a month. So I'm going to take it from 33. 26. I'm going to kick it up [00:05:20] and add an extra a hundred dollars, make it 34. 26. So as you'll see on the screen, and we'll put the website in [00:05:25] there.
[00:05:25] You can use this as well. This is a free tool. What I want to show you is that when I do that, what happens is in the top [00:05:30] right hand corner, You'll see that I shaved off two years and six months. So, just to add [00:05:35] an extra 100, saved two years and six months from the 29 years. So, now I'm taking it from 29 [00:05:40] years to 26 years and four months, just by adding an extra 100.
[00:05:44] Well, that extra [00:05:45] two years and six months of interest that I would normally pay That actually reduces the [00:05:50] interest rate that I'm paying on that loan because I'm not paying that extra two years and six months It also [00:05:55] reduces the amount of interest that I'm paying and you can see right here the total savings just in interest in [00:06:00] two years And six months is sixty eight thousand five hundred twenty eight dollars and eighty one cents Just a hundred bucks a month [00:06:05] for the remaining of the year remaining portion of that term of the loan, right?
[00:06:08] And so the reality is [00:06:10] We're not always disciplined enough to make a hundred dollars a month. We're just not disciplined to do it all the time. [00:06:15] So, what if you stroke a 1, 200 check at one time and said principal [00:06:20] only? You took 1, 200 on your tax return and said principal only. You're going to get the exact same, I [00:06:25] mean the exact same outcome right here.
[00:06:27] So, you actually have the opportunity coming up here in April when [00:06:30] we file taxes. You file it before they may get your return. Just apply it. to your mortgage and you're going to [00:06:35] get the benefits of all these things that we're showing right here. Now, I want to take it a step further. What if you [00:06:40] can apply more than 100 a month, right?
[00:06:42] What if you had the ability to pay it off [00:06:45] in an increment and say, well, you know what? I'm going to make an extra payment a year. So here's what I look at [00:06:50] on here. So if I look at it and I go, well, um, let me kind of work through the numbers here. So I'm going to look at [00:06:55] annually on here and I'll make an extra payment.
[00:06:56] So the extra payment is 33. 26. So that's what I want to pay. [00:07:00] On the extra amount per year. So broken down on that 3326. Let's go ahead and put that in here [00:07:05] and see what it does here. I want to show you so if I take 3326, I'm going to divide that out here monthly [00:07:10] and put it on here. 3326 put it on here.
[00:07:13] That's gonna be an extra [00:07:15] 277 a month. Watch what this does. This is where the real power kicks in on here where you can [00:07:20] control your mortgage by making that one extra payment and put it in there. Look, all of a sudden, Wow, look at the [00:07:25] savings on that. So your savings, you shaved off nearly six years by [00:07:30] making one extra payment a year.
[00:07:31] Just one. That's incredible. [00:07:35] Now, the lenders don't want you to do this. The lenders don't want you to make that payment. Why? Because you're saving [00:07:40] 157, 000. That's money that you would have given to them. Now, what's interesting [00:07:45] on here is that if you really, really start getting into this, and you come across some additional pay raises, [00:07:50] or you come across some money that you inherited, maybe you get a large bonus.
[00:07:54] You can [00:07:55] apply all that down. Now, if you can make over 10, 000 in [00:08:00] one payment towards the principal balance of one time. There is an option inside of your mortgage and you [00:08:05] need to speak with the mortgage service or the person you make your payment to, this is called a recast [00:08:10] and what you could do at this point is go to them, make a one time payment of [00:08:15] 10, 000 or more after you've had the mortgage for at least a year and say, I would like to [00:08:20] recast my balance.
[00:08:21] Now, at this point, you have 29 years remaining on this loan when you do [00:08:25] that, but let's say you struggle check. Let's say the loan amounts 500, 000 and at that time in 29 years, it's [00:08:30] 500. You put a check down and let's just say it's. You've rented some money. You're going to say, Hey, let's, I like to put 50, 000 into this.[00:08:35]
[00:08:35] You put 50, 000 into that. Now you're a balance of 450, 000. You ask them to [00:08:40] go in and recast that 450, 000 over 29 years at the interest [00:08:45] rate. Your principal payment comes down because now you're financing 450, not 500. [00:08:50] But there's a lot of lenders that will gladly accept that 50, 000. They're not going to bring up recast.
[00:08:54] That's something that [00:08:55] you're going to have to bring up when you talk with them. But it's worth it because the payment goes down. Now you can get a [00:09:00] new payment, but continue making the old payment. And you can see what happens when you [00:09:05] accelerate it. Right here. So I encourage all of our buyers. I'm like, Hey, listen, at the end of [00:09:10] tax season, when you get that, apply that balance, just give one extra payment a year.
[00:09:13] You're going to save nearly [00:09:15] six years on the property. And it's going to, it's going to literally save you hundreds of thousands of [00:09:20] dollars in interest. As you can see on this calculator here. Now there's another type of, uh, product [00:09:25] you can use called a bi weekly payment. Now this one's extremely popular because essentially you're going to [00:09:30] make 12 payments a year.
[00:09:31] Traditionally you make one every month, but what if you took that Payment [00:09:35] and cut it in half and said every two weeks. I'm gonna make a payment So every two [00:09:40] weeks you're making a payment. So in this case if the mortgage payment is 33 26 You're making half of that which is [00:09:45] roughly about 16 and some change right and you're making that every two weeks Well, you're actually [00:09:50] making 26 payments on the year, which ends up being 13 payments [00:09:55] in total instead of 12.
[00:09:56] Well, the reason that's important is because you're paying it down monthly, [00:10:00] quickly, faster. You're not taking one payment and stroking a check. You're actually paying it off quicker that way. [00:10:05] And you'll see what it does in the next calculator that I bring up. Right here. Okay. So we're [00:10:10] pulling up the graph here, taking a look at it again.
[00:10:11] If you're listening to this in the car, first of all, thank you. If you're [00:10:15] listening to this on Apple or Spotify, uh, jump over to YouTube, check us out at what's your one [00:10:20] more number one, subscribe, get all these graphs, get all these updates and things that we're talking about. And this is like an interactive chart that I [00:10:25] have on here.
[00:10:26] You know, we're talking about bi weekly payments and you know, I stress these because Yeah. [00:10:30] It's pretty simple to do. You take your mortgage payment, in this case, I was talking about the example we were using, the 7 [00:10:35] percent interest rate loan at 500, 000 on 30 years. You're taking that, which is a [00:10:40] 33 26 payment, and you're cutting it in half, which is 16.
[00:10:41] 63. And every two weeks, you're just making that payment of [00:10:45] 16. 63. And what you see is just the tremendous amount of savings and the [00:10:50] amount of time you're taking off of that mortgage. By doing it that way, in this particular case, [00:10:55] by making a bi weekly payment, like that's what you've done. You've done just effectively every two weeks.[00:11:00]
[00:11:00] Your mortgage is now instead of 30 years, it's 23. 7 years. And look at the amount of [00:11:05] interest being saved here. It's over 170, 000 on this loan. And [00:11:10] that's powerful math right there. And again, you're not doing anything different. You're not [00:11:15] refinancing Yes, theoretically you're making that extra payment, but you're doing it in increments that are a little more [00:11:20] attainable So why do it every two weeks?
[00:11:22] Well, that's because most people according to adp get [00:11:25] paid every two weeks, right? You either get paid on the 1st and the 15th 15th and the 30th the 10th and the 25th The [00:11:30] list goes on and on but you're getting paid in two week increments. So budgeting that that [00:11:35] Paycheck, if you may, based on your mortgage payment really sets up a nice opportunity [00:11:40] to shave a lot of interest and really lower your interest rate.
[00:11:42] Because again, the less interest you're paying [00:11:45] on the loan, the lower that effective interest rate is on your loan. So that 7 percent [00:11:50] becomes more like a lower 6 percent just by doing exactly what we're talking about. And I think [00:11:55] that's a real powerful way to take control of your mortgage in this time frame when rates may not be where they, you know, we [00:12:00] all want them to be.
[00:12:00] They're going to get there, but they're not there now. But all you're doing is shaving off [00:12:05] interest and cutting into the principal and you're helping yourself So when rates do get lower and you want to refinance your LTV [00:12:10] is gonna be in a better position that loan to value is Gonna be you know lower giving you more opportunity [00:12:15] to get an even lower rate and you're actually benefiting yourself because you're saving money You're [00:12:20] putting money back into your pocket on future payments that you don't have to make.
[00:12:23] And that's what we're trying to do [00:12:25] here on this episode as long as, excuse me, as well as other episodes here on the podcast is to give you guys value and [00:12:30] education on things that I like to call our hacks in the mortgage world and hacks in the credit world that often aren't talked [00:12:35] about. So, uh, real excited about that as we bring more to the show, appreciate all the feedback you guys are giving us because.
[00:12:39] It's [00:12:40] driving us to do more episodes like this and more consumer advocate things that we can aim for on here. So [00:12:45] we got a fed meeting coming up in the next week. Obviously, you know, that's like our Superbowl things around here this month. [00:12:50] So where are we talking about that? What happens? I'm still holding true.
[00:12:52] I think we're going to get four cuts this year. Uh, [00:12:55] we may not get in the month of January, but they're coming cause there's 12 months and they meet eight times. So, uh, [00:13:00] we're going to see what happens here in the course, but I'm going to say more cuts are on the way. Looking forward to that. Also [00:13:05] looking forward to the next episode guys If you like what you're hearing, please share this podcast if you would tell a friend about it Tell [00:13:10] a family member co worker, you know, obviously we're here to help you guys.
[00:13:13] We'd love the feedback You're putting on our youtube channel [00:13:15] at what's your one more keep the comments coming They mean a lot and like I said, they drive us to do episodes like this. So [00:13:20] until the next episode We'll see you at what's your one more?
