Prepaying Your Mortgage

0:00 Ralph: Have you ever dreamed a tossing extra money at your mortgage each month? Maybe you had friends talk about it and they told you about how much money they saved, or maybe the idea struck you right out of the blue. Well, folks today we're uncovering the benefits of prepaying your mortgage. And how it can supercharge your journey towards financial freedom. And that's what we're all about here. What if I told you, you can save thousands of dollars over the life of your mortgage by just paying a little extra. Listen today, folks.

0:54 Welcome back to the Ask Ralph podcast, where we help you master your finances from a Christian perspective. And today on this motivation Monday, We're tackling the exciting world of home ownership. And mortgages. Specifically, we're going to explore the power of prepaying, your mortgage. And see if it's a strategy that aligns with your financial goals and values. So let's start with some basics. Let's say for example, you have a $200,000 home. Your monthly payment at 30 years. That's a 30 year amortization. At 5% interest would be $1073.64. And it would take you 30 years to pay it off. The total amount of your monthly payments will be $386,507.

1:38 So that's what you'd be paying in total. For your monthly payments. So why. Are we thinking about prepaying a mortgage? Well, let's break it down. The truth is folks prepaying. Your mortgage is like giving your loan a swift kick. And it helps you get to that finish line faster. Well, Ralph, what does it mean to prepay? Well, it's pretty simple. It means making extra payments beyond your regular payment each month. And maybe if you can't afford to do it every month, do it. As frequently as you can. And those, extra dollars go directly towards reducing your principal balance. That's the original amount you owed on the loan. So let's talk about the financial benefits of prepaying, your mortgage. this is where it gets exciting.

2:18 Prepaying your mortgage comes with some incredible financial benefits. The first of which is you save a boatload of interest. This is a biggie. Since your interest is calculated based on what you owe. Hammering down that principle means you'll pay substantially less over the life of your loan. That's more of your hard-earned money staying in your pocket. Let me give you an example. I talked a few minutes ago about that 30 year mortgage, 5% interest rate. Your standard payments, $1073.64. Let's say, for example, you find an extra a hundred dollars a month. And pay it towards your mortgage. That means you're only going to pay $1,173.64. So a $100 increase. Well, what does that do?

2:58 Well, first thing it did. It's going to save you $37,068.19 cents over the life of the loan. Now that means you're going to pay that a hundred dollars every month. And you're going to save over $37,000 in interest. Think about that. That's huge. Here's the other thing it's going to do. It's going to help you own your home faster. Imagine paying off your mortgage years ahead of schedule. I've had several clients that have done this. It has led them to financial freedom. That's the power of prepayment. Think about all the things you could do once your home is free and clear. Let's talk about the example. We had a few moments ago.

3:38 In that example, where I had you pay an extra a hundred dollars a month. Instead of paying that loan over 30 years. You're going to pay it over 24 years and nine months had saved you five years and two months. Hey, while we're here. Let's think about another example. Let's say you could afford to do this. Instead of throwing an extra hundred dollars a month. Make it $200 a month. That would take your monthly payment, the $1,273.64. Now understand this is just principal and interest. This doesn't include your escrows or anything like insurance and property taxes. But if you pay that extra $200 a month, Guess what folks. Over the life of the loan, you're going to save $61,158.43.

4:19 That's enormous. Over $61,000 saved. Over the life of the loan by finding $200 extra a month to prepay on your mortgage. And best of all, guess what it did to the term. You're no longer paying over 30 years. Now you're going to pay for 21 years and three months that knocks off eight years, seven months from your mortgage. Now, depending upon how you approach prepayment, you might even get those monthly payments reduced. at some point of interest rates go down. You can potentially refinance your house for a much shorter term. Now let's talk about the benefits of prepaying from a Christian perspective. Because here at the Ask Ralph podcast, we believe in managing money in a way that honors God.

5:01 That's why we do what we do. Here's how prepaying aligns with your Christian financial principles. Number one, stewardship. Prepaying demonstrates responsibility. And wise stewardship of the resources God has entrusted to you. If you are saving interest. You're doing a good job of being a good steward. The other thing, and this one is massive. It helps you get freedom from your debt. The Bible reminds us in Proverbs chapter 22, verse seven, the borrower is a slave to the lender. I think I've said that a million times. Now in my podcast. But it's so very true. Prepaying puts you on the fast track to breaking those chains of debt and they are chains.

5:42 Debt will hold you down. Now, I'm not saying that debt is a bad thing. There are very good reasons to have debt. But you have to do it wisely. And what that does freedom from that gives you more freedom and flexibility. You can be more generous. You can support missionaries, you can support your church. You can support your family. Another Christian thing. It does it give you peace of mind? There's something truly liberating about knowing your home is yours. I've had so many clients come in to me and say, Ralph, guess what I did this year? What'd you do? I paid off my mortgage. And you can just see the pride in their face. And I've had clients that have taken my approach and they've taken a 30 year mortgage and paid it off in 10 years.

6:22 Now, of course, they're not going to do a $200 extra month, but has really not that much more. And you can save. Months and months and years and thousands of dollars. And think about that burden that it unleashes. It can give you peace of mind, allowing you to focus on your faith. Your family. And other passions that God places in your heart, because you don't have that saddle of that mortgage debt over your head. So let's ask the simple question. Is prepaying rate for you? It. I sound like a no brainer. But hold your horses folks. There are some things you need to consider and everybody's situation is unique. So I'm going to put a plug in here for my services right now.

7:04 I'm happy to have a consultation with you. You can go to the ask Ralph podcast site, that's askralphpodcast.com/store. You can schedule a consultation with me. You're going to pay a consultation fee, but if I can save you $60,000, I think paying a consultation fee is worth it. But everybody's situation is different. So let's think about some considerations. So number one, financial goals. You might have other priorities competing for your money, like building a strong Emergency fund. Or investing for retirement. So those are all things we have to take into consideration for your individual situation. You also have to think about your interest rate. There are people right now that have two and 3% interest rates on their mortgages. Well, if you have a rock bottom interest rate, the money saved by prepaying may be less significant.

7:49 if you can earn. Money in the market or investments or CD's right now, the truth is this. You can go out to the market and buy CDs, know, and banks they're paying five, 6%. Well, if your mortgage is 2%. I'm not sure that prepaying is all that beneficial for you. So that's something you need to talk with a financial advisor, somebody like myself, and look at your individual circumstance. And what we're talking about your life circumstances, are you facing major changes that require more financial flexibility? holding off on prepayment right now, by be wise, like if you've got a child that's going into college, maybe that extra a hundred dollars that extra $200 a month needs to go for that college. And I understand that, and that's an individual thing.

8:30 So I always try to give you action steps. So let's talk about some action steps. So, how do you figure out if this is the right path for you? Here's your action plan. First thing you have to do. And I stress this. Talk about this in my book, mastering your finances. The first chapter of my book is all about budgeting. You can get that book again at my website, askralphpodcast.com/store. So you do a budget check and see how much extra you could realistically put towards your mortgage each month without derailing your other essential expenses. So if you say Ralph, I can put $300 extra a month. Well then do it. We just looked at two examples where. An extra hundred dollars a month saved you $37,000.

9:11 And an extra $200 saved over $61,000. If you can find that in your budget to do it, then do it. But, all of this goes along with seeking guidance, talk to a qualified financial advisor. Who understands your goals and can assess your total financial picture. you may have to pay for that service. Guess what folks. You get what you pay for in life. If someone can save you thousands of dollars, then by all means, sit down with them, have a consultation with them, have a consultation with me. I don't care where you live. Zoom has opened up the doors that I can talk to people all over the world. And I do talk to people all over the world. I have saved people. Thousands of dollars on their mortgage by making an extra $50, $200, $300 a month in payments.

9:55 And then you have to do the math. And that's what I would do. If I sat down with you. Explore those online mortgage prepayment calculators. Hey, in preparation for our meeting today. This is what I did. I went online and I said, okay, give me the average $200,000 home. What's the 30 year fixed rate, 5% mortgage. And what if I pay an extra a hundred? What if I pay an extra 200? There's things are all out there. Folks are just there for you. To take a look at. So let's talk about what we've talked about today. we talked about the benefits of prepaying your mortgage. We talked about how much interest that can save you. We talked about how much time that can save you over the life of the loan. We talked about the Christian stewardship portion to that, and that peace of mind, knowing that your home is paid for.

10:38 Friends prepaying your mortgage can be a fantastic strategy to save money. Paying off your home sooner and taking control of your finances is a way that honors biblical principles. However, remember this. It's not about rushing into anything. You got to do your research. Consider your individual situation and maybe even pray about it. Hey, always take your petitions to God in prayer. He will give you direction and guidance and maybe he'll put people in your life. Maybe I'm that person in your life. If I've impacted you on this podcast, please do me a favor. Share it with somebody. If you know, somebody that's struggling with their finances, do me a favor, share my podcasts with them. My goal is to reach people. If I can help one person.

11:19 then I feel like I've done my job. I feel like I've done what God sent me here to do. And if prepaying aligns with your financial goals and values, prepaying might just be the key to unlocking financial freedom and living a life filled with greater purpose. And isn't that what we're all trying to do. We're trying to get to what God has for us in our purpose. And that's a wrap folks. Hope this episode has inspired you to take a closer look at your mortgage. And how prepaying could benefit your financial journey. Remember to check out our podcast page? I think I've mentioned it five times now. That's at askralphpodcast.com while you're there, I encourage you to join our email list. Every week, we're giving away an Amazon gift card for $25. So you don't want to miss that and share that with friends so They can sign up as well.

12:01 So until next time, as I always say, Stay financially savvy. Find financial freedom and God bless you. Abundantly.