re: How to pay down mortgage quicker?
Ok so I know most everybody has heard about making biweekly mortgage payments in order to pay your mortgage down faster. Instead of making 12 monthly payments a year you make 26 half payments or 1 extra monthly payment per year. Over time, this additional annual payment can subtract approximately 7 years off the life of a typical 30 year mortgage. The challenge, of course, is sticking to the schedule and tracking your savings so you know how much you are reallocating toward your financial objectives that would have otherwise gone to your lender.
But how could something like this work with a BRRRR? I understand that the property is being rented so if the tenant is paying the mortgage (ideally) then why go to extra trouble to pay down the mortgage faster? Didn't that extra trouble actually build your equity faster though? If you can reduce the life of your 30 year by %20+ then aren't you able to buy your next property %20 faster to keep the BRRRR going and build the portfolio quicker?
With these thoughts and others in mind - how would you go about paying more on your mortgage so you can pay it down faster so you can buy your next house faster?
Actually, I wouldn't Cash is king and you need all you can get to deploy for your next deal. Take a look at your tax return...either your Schedule C or your 1120-S...whatever you file. Notice that you are expensing the interest. Let's assume you have an 8.5% interest rate and your in a 25% tax bracket. Your effective rate (ER) = rate ( 1 - tax bracket) or ER = 8.5% ( 1 - 25%) = 8.5% ( 75% ) = 6.375%...after taking into account the interest expense you get on taxes. Would you borrow money for your down payment on your next deal at 6.375%? If not, then by all means pay down the current mortgage. If you would, then don't pay down the mortgage early, keep your powder dry, and use that money to grab more appreciating real estate. Good luck you you!
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@David Wilhite paying down your mortgage goes AGAINST just about every principle of real estate that there is. Meaning, if I gave you $50,000 right now - would you pay down your mortgage or go acquire another property? The theory is that your TENANT is paying down your mortgage. The mortgage interest is tax deductible. The less equity you have in a property the less that someone can take it from you in a lawsuit. I am personally millions of dollars in debt...but the only way for me to own millions of dollars of real estate is by NOT paying down my tax deductible debt and continue to purchase more real estate.
I hope all of this makes sense.
