Day 6 of The 14-day Passive Income Challenge - 15-year vs 30-year Mortgage - Chaim Ekstein

welcome welcome welcome i'm so excited to holding  at day six of the 14 day Passive income challenge   yes we're still in the middle of discussing the  leverage part of the ALM model Attract Leverage   Manage how this could help you in your passive  income plan stay tuned with us today we're going   to discuss a 15-year mortgage versus a 30-year  mortgage and everything in between 10 15 20 25   prepayments makes sense doesn't make sense should  you do it should you not do it will it help you   and your passive income planning will it not help  you and as a reminder comment below if you have   any experience with that or if you have any ideas  and yes i look at every comment and i reply also   if you want to get all the updated videos from  us on the passive income strategies make sure you   subscribe to the channel below this video let's  jump right in so as you remember from yesterday   we discussed a free and clear mortgage a house  free and clear versus a house with a mortgage   and we made you aware that could be having a home  free and clear is not the smartest strategy if you   want to build a passive income portfolio if you  missed that just go back to the yesterday's video   and look at it again and if you need pause  it rewind it look at it again and again until   it makes sense for you if you have any questions  you can comment below and i'll try to answer you   today we're going to discuss about having a  mortgage yes having a mortgage but having the   mortgage paid quicker than 30 years or quicker  than whatever is the minimum necessity to pay   the mortgage making extra payments should i  make a 15-year mortgage vs a 30-year mortgage   or should i do something else with the extra funds  in place instead of just pre-paying the mortgage   let's jump to the ipad screen and i will show  you so yesterday we spoke about having a mortgage   free and clear versus a mortgage on a house and  today we're going to talk about 15-year mortgage   versus a 30-year mortgage once you understand  15-year mortgage versus 30-year mortgage i think   you're going to understand everything in between  including does it make sense to prepay a mortgage   to make extra payments or does it not make sense  and so on and so forth let's talk about a 15-year   mortgage first let's say you're talking  about year number one up to year number 30   and let's say we're talking about somebody  who's making a mortgage payment of let's say   six thousand dollars a year and i'm doing this for  simplicity reasons six thousand dollars a year is   five hundred dollars a month so somebody's making  a 500 a month mortgage payment i wish i wish i   wish that would be a realistic number but just  for the illustration let's talk about somebody   in this situation five hundred dollars a month  six thousand dollars in annual mortgage payment now this is a 15-year mortgage what we know is  that by year 15 the balance on the mortgage will   be how much the balance on the mortgage will  be how much zero okay because it's a 15 year   mortgage so wow after 15 years american dream i  have a house free and clear so exciting making   a big party celebrating now let's visit  our friend that has the 30-year mortgage same thing one through 30 but because his mortgage is a 30-year  mortgage he's not making it six thousand   dollar a year in payments but let's say he's  only making a four thousand dollar a year in   mortgage payments now you say  of course you're only making a   four thousand dollar a year mortgage  payment but what is your balance after   15 years because you have a thirty year mortgage  only after 30 years you're balance is zero after   fifteen years let's say in a hundred thousand  dollar mortgage i'm just making up some numbers   let's say your balance is still 75 000 after  after 15 years you would say of course of course   of course it makes sense to do a 15-year mortgage  you pay like 180 or something like that in a month   extra two thousand dollars a year extra and you  know in 15 years you're free and clear you're done   versus the the 30 year mortgage guy after 15 years  you still have a 75 000 mortgage of course that's   a worse situation and you are right if that's the  only thing you look at but what we didn't look at   is that this guy that has a 30-year mortgage  also saved 2,000 a year in mortgage payment   which we can now from year one to year fifteen  put away the two thousand dollars a year somewhere and let's assume for this conversation  that we're paying three percent   interest on the 15 and 30  years and i know sometimes   a 15-year mortgage will be less interest than a  30-year mortgage but let's not go into that let's   not go into the nitty-gritty in that i just want  you to understand the concept for now and for this   illustration i'm also going to assume that  the 30-year mortgage guy who is saving   two thousand dollars a year is also going to put  away the money in an account earning three percent okay now what i will tell you is something that   is so simple that i'm even thinking why i'm  teaching it but i tell you what for most people that i show this they tell me it's  the first time i've seen this this way   that's why i'm showing it to you so in this  situation what you're going to find out is   that after 15 years the person who put away  2 000 a year in the savings of the mortgage   assuming that it's a three percent return  you know how much is going to have in 15   years in that account exactly the same amount  that the mortgage balance is which is 75 000 now if this is not three percent but it's four  percent of course this is also going to be higher   if this is 2.75 and this is and this is five percent it's going to be even  higher but don't you see that this person who is   doing the thirty-year mortgage instead of the  15-year mortgage is any time in a position to   just pay off the balance and be in the shoes of  the 15-year mortgage person and even better what   happens if god forbid a 30-year mortgage person  is disabled he cannot make his mortgage payment   for a few months he loses his job he has to go and  find new employment for a few months who is more   in control the person in the 15-year situation or  the person in the 30-year situation of course the   person in the three-year situation what happens  if an amazing passive income deal comes across   and you can take advantage of it if you have  some funds you have money sitting somewhere that   you can take advantage of opportunities versus the  15-year mortgage all this money is buried into the   bricks and walls of his house because he wants to  be free and clear again if your goal is to be free   and clear you should go with the 15-year mortgage  but if your goal is to have a passive income plan   you have to look at the entire situation not only  on the piece of property that we're talking about   okay that was day six of the 14 day passive  income challenge share with me your experience   if you did a 15 year or a 30 year mortgage if you  made any prepayments or any combination between   15 and 30 years and how it worked for you or if  you didn't do it and how it works for you and   let's have a conversation about it as i told you  before i'm reading every comma and i'm replying   to any comment that you will post  if you want to get all the updates   for the passive income strategies make sure  you subscribe to the channel in the bottom   underneath this video and let's do this  together see you at the end of 14 days