The Death Pledge
Jesus called the devil a murderer from the beginning and He also stated "I came that they may have and enjoy life, and have it in abundance."
Why is this post titled The Death Pledge? Do you know what the origin of the word mortgage is? It comes from the Latin word "mortuus" (dead) and the French word "gage" (pledge).
If you have entered into one for some time, it may feel like a pledge to the death, but the good news is it does not have to be that way - we'll cover that aspect a little later.
First, let's focus on the Amortization Table. Many have never seen one or realize that it shows exactly how much of your payment in a given month goes to Principal, how much to Interest, and the Balance remaining. In this example below we are using a $519,000 home with a 3% interest rate at a 30-year term.
See how nearly $1,300 of the payment is going to Interest, and just under $900 to the Principal? When viewed this way, it feels like you are paying 59% interest and not the 3%. It's really just 3% if you pay it off in one year. This is factoring a historically low interest rate, when traditional rates are applied the table tilts much greater towards the Interest paid.
At this low interest rate, it takes about 7 years for Principal paid to even equal the Interest paid, and by that time you will have made over $183,000 in payments, but only paid down about $83,000 from the Principal, still owing over $435,000. See the results in black-and-white below.
Now for the good news - you don't have to plod along this traditional way, working hard in "servitude" for 30 years. You can break free and gain your freedom!
Regarding the methodology in the Debt-Freedom Class my wife Karen and I teach (and steps also found throughout this blog), the first debt to be paid down is that with the smallest monthly payment, and you progress to where your mortgage is the last remaining debt - so here we are covering only the mortgage segment.
By making an additional payment amount beyond the mandatory monthly amount, that money is applied directly to the Principal - reducing it dollar-for-dollar that is paid. By taking this step you are gaining substantial additional equity every month, will have even more Principal reduced by your normal monthly payments, and rapidly move towards retiring the mortgage. Most households who follow the plan (first paying down other debts) then pay off their mortgage in 3-4 years.
Remembering that Amortization Table, imagine you are the Mortgage Company... would you ever want a lender to pay down that amount early, or to just send you a check every month? Of course you would say "just send me a check every month."
If you are considering a refinance option, reflect back on that Amortization Table and realize that they may say they're shaving off a percentage point or two in interest rate, but what they are doing with another 30-year note is plugging you back into the top of the table where you've just seen you're paying the most towards Interest and the least towards Principal.
If you refinance, request to see what the payments look like at a 20 or 15-year mortgage instead of settling for 30 years. Some lenders allow you to set exactly the number of years you want - so you don't have to go back into that top of the table again.
Jesus said in Luke 14:28 "For which of you, wishing to build a farm building, does not first sit down and calculate the cost [to see] whether he has sufficient means to finish it?" His topic was the commitment in following Him, and thus He used a parable all could understand.
Remember you are not bound to paying a mortgage the traditional way. The Lord will help your cause in this - in our household God blessed us both with unexpected raises shortly after our commitment, which brought us to freedom even sooner, and we have heard testimonies of others who have had similar blessings occur.
That mortgage was not scheduled to be paid off until July 2023... had we not decided to go a different way.
"For I know the thoughts and plans that I have for you, says the Lord, thoughts and plans for welfare and peace and not for evil, to give you hope in your final outcome". (Jeremiah 29:11)
God Bless you and may He show Himself greatly to you,
Paul
