Using home equity to pay off debt

All right, all right, all right. Matt, the mortgage guy. In today's video, I'm going to show you how to save more than $1,800 a month on your monthly bills. I'm going to show you how to pay off your mortgage in less than 11 years. I'm going to show you all kinds of cool stuff that you could, should be considering with mortgage rates this low, with this much equity in housing in the current environment. Before I jump into it, if you like straightforward, honest content from a mortgage broker who's talking to consumers all day, every day, please consider subscribing to the channel, like comment, do all that stuff. I won't waste your time with any more of that. Let's jump into it. In today's video, I want to go over a scenario just to give you an idea of different creative things you can do with your current mortgage, with your current household budget to save you money in the long run. As most people know, home prices have gone up in some areas, 30, 40% just in the last two years. So if you bought your house four years ago, six years ago, eight years ago, and you haven't refinanced, you haven't pulled out cash, but you have other debts that you want to pay off, take a look at this video. Your scenario is going to be unique. You might have more or less debt. You might have more or less equity, but you'll get the idea through me just going through an example. So in this one, I just tried to plug in some random figures. People I talk to on a daily basis that have bought in the last three to five years. And so for this one, I just plugged in 2016, I plugged in a $350,000 purchase price. This fancy calculator brought to you by MBS Highway does all the calculations. It's got a high tax rate of 1.79 because I put in one, two, three main street in Rhode Island and Rhode Island has some high property taxes. So may or may not be the same amount for you. It really doesn't matter for this thing, but it takes the home price appreciation since 2016 and calculates it to tell us this home will be worth 515 today. Where I'm at in California, it's probably pretty similar numbers. Something that was bought five years ago for 350 is probably worth in that 515 range now, maybe a little bit more, maybe a little bit less. For our example, I just thought of the average person I talked to might have a $500 a month car payment on a car they owe 27,750 on, and they might have 55,000. This could be credit card debt. This could be student debt. This could be a whole bunch of things for ease of me putting this thing together. I just put 55,000 in credit card debt and total payments on that. 1125 is probably conservative. Some people have 1500 or $2,000 a month in credit card debt. With all this appreciation that's gone on over the last five years, let's say they put 5% down and then they've also paid the mortgage down because they've been making payments for five years. 304 is what is owed today. They've got a mortgage. It's got some mortgage insurance. It's got a 4.125 interest rate. That's an 1882 principal interest and mortgage insurance. Current debts, I added these two in, the vehicle loan and the credit card debt. It did some ratio qualifications, which that's another story. I plugged in $2,700 in closing costs. That's probably a pretty good average. Now here's where the magic happens. We're doing a cash out refinance. We're paying off those two debts. It's about $80,000 in debt. I think that for a lot of people, maybe you only have 40, maybe you have 105. I don't know. Lots and lots of people have big chunks of debt and lots of equity. Here's a way to get creative with it. You do a cash out refinance, you lower the interest rate. You also remove that mortgage insurance and you're paying off all that debt. Here's what's happened. Let me move this pretty face over here. Before you had principal interest payment of 1637, look at that. Your payment is almost exactly the same minus that mortgage insurance. Your payment actually goes down $250 a month. This 1625 that you've been paying towards credit cards and your car payment, gone. Instead of 4131 in monthly outflow between the credit card, between the car payment, between the mortgage payment, now your new mortgage payment is 2267. Those other debts are gone. A couple of different things you can do. One, you can take that $1,800 and you can invest it, college fund, index fund, whatever you want, right? It's your choice. Or cool little calculator here shows what would happen if you plug this 1864 back into your mortgage. You said, you know what? We've been paying this $4,000 a month. We obviously got it, right? But instead of paying it towards credit card and car payment, now I'm going to throw extra principal payments. That's principal. You pay that loan off in 10 years and 11 months. It shows that you saved about 14 years off the term because remember you've already paid on this thing for five years. And then it will show you those chunks off of the principal that you're paying. After five years, you've gained 125,000 on the pay down, on the amortization schedule, right? After 10 years, you've gained 265. Essentially giving yourself a $200,000 increase to your network. It's pretty cool. If you change this calculation and you took that $1,800 and you invested it in whatever you believe in, everyone's got a different philosophy. Everyone's got something different they believe in. Low cost index funds, mutual funds, the stock market. I don't know what it is, right? But let that compound month over month. You'll probably see similar or even greater increases to your network, right? So this is just something that I think is important for people at the very least take a look at, right? There's so much equity in housing right now. And in this case where you owe 300,000 and it's worth 515, there's no harm in doing a rate and term refinance, remove the mortgage insurance, lower your monthly mortgage payment, and that's going to save you some money. But if you have that other debt, especially if it's high interest rate credit card debt, why not take a look at something like this? Pay it all off in one fell swoop. For most people, it's going to do a couple of things. It's going to alleviate a little pressure as you would imagine when you've got 41.31 a month going out versus 22.67 now. It's going to increase your credit score. It's going to do a bunch of positive things. So if you have further questions, me and my team are more than happy to help. Reach out to us at greatmortgagebroker.com. The link will be down below. Fill that out. Let us know how we can help. We're licensed in all 50 states. So by filling that out, you're going to tell us what state you're in, what you're looking to do. You're going to be connected with the right person on the team who can help you out. We're more than willing to walk you through different scenarios, different things that might fit you and your specific budget plans, your specific scenario. So until next time, thanks for watching. As always, I appreciate you and we don't see.