Amortized Loans are toxic debt, destructive to your net worth and retirement nest egg.
Do you have a 30-year mortgage, a student loan or other amortized debt? Go find the amortization schedule you were given at the close of escrow; it takes almost 15 years before the principle portion of the loan payment equals the interest. During the term of the loan, you will pay out 80% to 120% of the original loan balance in interest- and that’s if you don’t re-finance along the way! What if you knew how to pay-off the loan balance in less than half the time and used your equity and cash-flow to purchase a rental property?
This concept is used by homeowners in Australia, New Zealand and United Kingdom; major corporations use this strategy effectively. This concept is called Velocity Banking; it is just an efficient way of managing cash flow and credit to obtain a total return on cash.
One can budget a periodic extra principle payment to shorten the time required to pay off the mortgage. While if applied consistently, this would reduce the time to become debt free. This may not be the best strategy as mortgages are one-way- you can make a payment to principle but can never use this extra money in the future should you have an emergency!
How much do you owe? How are you paying it back?
The fact of the matter is that as Americans, we have been taught to be payment oriented. We don’t care about the principal balance. We only care about affording the monthly payment.
