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Keys to your own home

How To Pay Off Your Mortgage in Half The Time – Pt 2

You have seen what is possible in Part 1; now learn the technique of how to pay off your mortgage in half the time PAINLESSLY

Think of your property as a big credit card.  

This is not too hard as the bank:

  • creates a statement that shows charges like interest and bank fees, and receipts which are your mortgage payments. (Interesting that the bank rarely, if ever sends out this statement as they do not want you to see it.).  
  • gave you the mortgage because they thought you could afford it - which is identical to why they gave you a credit card; they felt you could afford it.

Thus. like a credit card, you want to pay the mortgage down as much as possible the shortest amount of time.  So put all income on this credit card as you earn it.  

Everything (and we do mean everything).

That is all you have to do with the payments side of the equation.

But how do you live?  Bills have to be paid, food bought, rent paid, etc.

The trick is paying these expenses with "free" (read "someone else's") money.

Fortunately the banks have provided us with the answer........

 

Credit cards

Credit cards can give you up to 55 days interest free. 

That is, 55 days of reducing the balance of your mortgage and avoiding the interest that would have been incurred.

So everything that you spent in February, has to be paid for at the end of March; every thing you spent in March, hast to be paid for at the end of April.

You must have enough credit to cover two months worth of expenses.  Sit down and add up your expenses exclusive of your mortgage repayments and make sure your credit limit is double that.  

This is really not that hard to figure out:

  1. if you bring home $1,000 a week and you have weekly mortgage payments of $350,
  2. you are living on $650.  
  3. Multiply by 4.34 (the average number of weeks in a month) equals $2821.  
  4. Round it off to $3000.
  5. Two months of spending equal $6.000

So get a card with a $6,000 credit limit.

This is not hard as most banks almost automatically start at a credit limit of $5,000 nowadays so upping that limit by a $1,000 is fairly easy.  

Some people get two cards with limits of $3,000 (if available) and use one card in the odd numbered months (1 - January, 3 - March, etc.) and the other in the even numbered (2 - February, 4 April, etc.)

Whatever - the important thing is that you have the 55 days interest free period because you want you money sitting on your mortgage as long as possible without costing you a thing;

No interest; Nix; Null; Nothing.

But hold on, I hear you say, how do we pay the credit cards when the time comes?

You take the money from your money from your mortgage.

Your receipts from wages, rent and everything else have been working for you keeping the interest down.  Now you need it to pay your expenses.

So you take what you need and pay the. credit cards.

Make sure your mortgage has minimal or, ideally, no redraw fees.  Another trap the banks have where they charge you for using your own money (the term for this is equity.)

Now that you understand the process I will explain how this shows up on your spreadsheet report that you got from the last blog.

Days interest is calculated so this should be the number of days in the month. Because is interest is calculated daily and charged monthly, you have to know the number of days.

The Opening balance came from what you said was your mortgage's outstanding balance.   

The Monthly Income is the total of your payments from e.g. wages, government benefits, lotto wins, etc. etc.

( I put this at the first of the month but in reality, receipts happen over the month
and can be quite  random.  This makes some difference to the total numbers but I
did tell you that everything was approximate.  Plus I am not a fancy programmer so
this was the best I could do.)

 

Interest is the total interest on the outstanding amount of the mortgage calculated daily charged monthly.

Monthly expenses are whatever you said you needed to live on exclusive of mortgage payments.

Closing Balance is the mortgage outstanding at the end of the month.

Look at the movements on your report.

Awesome   :-) 

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