WARNING: Don’t EVER Pay Off Your Mortgage | Dave Ramsey Is Wrong!
Updated: Nov 14, 2022
Paying off your house fast as possible sounds like a great idea in theory - but what if I told you that this is exactly the OPPOSITE of what wealthy people do?
In fact, and I love Dave Ramsey, don't get me wrong - REAL wealthy people do the opposite of pretty much everything Dave says on growing your wealth!
See, Dave falls in the category of what most financial institutions say about paying off any kind of debt as soon as possible like credit card, student and car loans for example.
But what if I told you that you can likely retire WAY quicker by NOT paying off your mortgage? Like at all!
Now before you say, "but wait Mat! The only way to retire is to get rid of ALL of your bad debt!"
It's actually wrong! I'm sorry!
Let's break this down a little further.
Dave Ramsey Says You Should ...
1: Not Buy A House UNLESS You're Completely Out Of Debt, First!
2: Get A 15 Year Mortgage, Not A 30 Year!
3: Put 100% Down If You Can (buy the house cash)
4: The Monthly Payment Should Only Be 25% Of Your Income
Now while I agree about your monthly mortgage payment only being 25% of your income (most Americans are pushing 40-55% of their income) - that's about all I agree with.
As a self made Multi Millionaire from mostly investing in real estate, do you know what I'd recommend you do in order to truly become wealthy?
Buy Real Estate As SOON As You Can!
That's right! Buy a house as soon as you can!! Check this out ...
If you bought a home, let's say 5 years ago for $400,000 - over the last few years you've experienced some serious appreciation in the market!
Even with the current pull back we've had due to increasing mortgage rates, this house would likely still be worth $700,000 today.
Get A HELOC
Now I want you to get a Home Equity Line Of Credit (HELOC). A HELOC can be thought of as essentially a credit card against your home.
Yes, that's right, I want to get MORE debt on the house. Hear me out!
A bank will lend you up 80% of the home's value. So if the home appraises for $700,000 - 80% of that is $560,000.
But you only owe $400,000 on the home (likely less because you've been paying it down for the last 5 years, but let's keep things simple!)
$560,000 - the $400,000 you owe on the first mortgage and you're left with $160,000 of money you can use at your own will!
Don't Do What Most People Do ...
Now most people would take that money and buy cool cars, blow it on vacations or TV's - but we're not going to do that!
I want you to take that 160K and buy ANOTHER property. A rental property!
Now let's say you buy this property today for $400,000 in a nice area, but not as crazy as your primary home. We're thinking like investors now.
You're going to buy a "starter home". Something tenants would love!
You'll need to put 20% down ($80,000 on 400K) as an investor on this property plus some renovations of $60,000.
You're in for a total of $140,000. You'll still have 20K left over for reserves for yourself, great!
Now if you follow the Frutiful Method, we're getting 25% returns ever year for our partners and us on our purchases.
So after 5 years of getting 25% returns, you'd turn your $140,000 investment into $427,246.
That's a GAIN of $287,246. Isn't that crazy!!
That's the power of compound growth!
Do It All Over Again
Now, what do you think I'm going to ask you to do 5 years later?
Do the refinance or HELOC strategy AGAIN! But this time, on BOTH of your properties.
2 properties turns to 4. 4 to 8 and so on!
Do you see how the rich would get richer???
The Wealthy LEVERAGE Cheap Money
If you can borow $140,000 on your home at a 5, 6 or 7% rate as a second mortgage HELOC and invest it into real estate that spits out a 25% yearly return - why wouldn't you do that trade all day long??
While most financial institutions and Dave Ramsey would say NOT to take on more debt, we're taking on STRATEGIC debt and investing it into quality homes in quality areas.
And while I might be making it sound slightly easier than it sounds - it certainly isn't hard!
This is how I've been able to create millions for myself and create serious wealth for many of my clients and partners.
If you want to work with me, as a partner or client, these are the kinds of things we're doing for our team. Feel free to reach out to me through our site or on Instagram @matpiche