27 Apr The 2nd Month of the Overlooked Strategy by Financial Advisors
In my last post, I showed you how simple it was to use the bank’s money by withdrawing $5,200 from your line of credit, applying this to your mortgage and paying just $6 in interest. You saved $21,000 in interest!
So, what happens the next month? Let’s continue our journey.
Start the Month with a Line of Credit Loan Payment
On the first day of the month, your beginning balance on your line of credit is $6,067.69. Since payday is on the first of the month, you also make a loan payment of $5,025 to your line of credit. Yes, that’s your complete paycheck. This immediately drops the balance you owe to $1,042.69. The 1st of the month through the 14th day, you owe the bank $1,042.69.
Stick to Your Budgeted Payments
On the 15th, you’ll make your regular mortgage payment of $1,032.69 by writing a check from your line of credit for your mortgage. You’ll also make your interest payment of $6.15 for the interest payment due from the previous month. This increases your balance from $1,042.69 to $2,411.53. From the 15th of the month to the 27th of the month, you owe the bank $2,411.53.
On the 28th, write a check from your line of credit for your budgeted $2,662 living expenses. The balance you owe the bank has increased from 2,411.53 to $5,073.53. This will be your balance from the 28th through the 29th.
Lastly, on the 30th, write a check for $300 from your line of credit for savings. This increases the balance you owe the bank to $5,373.53.
Additional Mortgage Payments Aren’t Made Every Month!
Notice, we’re not making an additional mortgage payment. Why? We only make an additional mortgage payment when on the 29th of the month the balance owed on the line of credit is less than $5,025. Since our balance is $5,073, we just make our savings deposit.
Our average daily balance for the second month is $10.24. In just two months, you’ve avoided 27 months of mortgage loan payments saving $27,318 in mortgage interest. You’ve paid just $16 in interest!
Your Budget Creates Your Solution
On the 29th of the month, every time you owe the bank less than $5,025, you’ll make an additional mortgage payment of $1,693. This is your solution when you have bank deposits of $5,025 during the month and have $1,000 after all bills are paid.
Assuming your income doesn’t increase, your mortgage will be paid in full in just a little over 14 years. The best part is you haven’t touched your savings nor have changed your regular savings program.
In my next post, let’s talk about why this is an equally effective way to build wealth.
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