Refinance Mortgage and Make Even More Money on the Savings

Refinance Mortgage and Make Even More Money on the Savings



what's going on everyone my name is Anatoly welcome to totally invested where we discuss all things finance now today I want to talk about something that's been a hot topic lately and that is mortgage refinancing you can say the ton of money by refinancing your mortgage but today I'm going to show you a particular method you could use to have the bank essentially pay the majority of the interest on your loan I'm gonna put it over to my computer for a second and show you so here we have Ashley Bob and Kathy with the C a year ago all three purchased homes individually and borrow three hundred and fifty five thousand under a 30-year mortgage at a rate of four point five five percent with mortgage rates fallen recently Ashley Bob and Kathy decide each should refinance their home now we know that refinancing can save money on interests but let's see how each of these people fared with their particular decision with their interest savings here we have the original loan amortization schedule with total interest of two hundred ninety six thousand three hundred and forty six dollars and 15 cents with interest rates lower Ashley Bob and Kathy decide to refinance in June 2019 all three were able to obtain a lower rate at four percent even with the refinance Ashley will pay a total of two hundred sixty eight thousand sixty eight dollars and 32 cents of interest throughout her mortgage this includes the one year of internship already incurred now this is already a savings of twenty eight thousand two hundred and seventy seven dollars and eighty three cents with her monthly payment lower she was able to lease a new car not the best idea but that's a topic for another video now Bob is a savvy investor and realizes that he can afford to continue making the same payment he had with the original loan which means every month bob is applying an additional one hundred and forty three dollars and eighty nine cents to the principal of the mortgage over time bob is able to save even more money on interest in Ashley to the tune of forty thousand twenty one dollars and forty nine cents and saves a huge sixty eight thousand two hundred ninety nine dollars and 32 cents versus the original loan also because Bob is making these larger payments he's able to pay off the loan in 310 months or just about four years sooner so so far it seems Bob is the winner right well let's see so Cathy will the C had a different idea she opened up a free brokerage account and decided to deposit the monthly savings from the lower payment or the same 143 dollars and 89 cents to the account every first of the month now the historical return of the sp500 is 9.8 percent or roughly zero point 8 2 percent per month since the deposits will be monthly it is best to calculate and compound the return monthly so over the 30 years Cathy with a c' will deposit 50 1798 dollars and 66 cents to the brokerage account now we all know the market goes up and down but work with me here over 30 years if the market maintains its historical average return Cathy will grow her account to three hundred twenty thousand dollars three hundred twenty thousand two hundred eleven dollars and fifty one cents now Cathy is a taxpaying citizen and in the US must pay a fifteen percent tax rate for long term capital gains on her stock earnings so the horn will still end up costing Cathy two hundred and sixty eight thousand sixty eight dollars and 32 cents of interest however she is able to offset that with her gains and essentially have only 40k or thirty nine thousand nine hundred seventeen dollars of interest over the life of the mortgage at the end of the day Ashley Bob and Cathy with a/c end up owning their homes with the mortgage is paid off but only Cathy is able to withdraw a nice chunk of change from her account to help with retirement so as you can see all three were able to save the money on their mortgage however came out the clear winner she was able to use the savings from the refight to invest and make enough money to cover the majority of the interest on her loan thanks for tuning in guys please remember to like the video and subscribe for more financial tips and tricks