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Spreadsheet: Investing vs Extra Mortgage payments Calculator Spreadsheet (Apple Mac Numbers and Excel available)

Everybody welcome back to drawbridge finance today i’m going to show you an amazing spreadsheet i built that compares mortgage payments to investment returns as always welcome back to the channel my name is levi woods this is drawbridge finance this is an opinion channel about money i’m not a offering financial advice i don’t work in the finance industry at all but

As you guys know i am daily trade i’m an options trader i’m a long term buy and hold dividend high-yield dividend investor and i have this channel to help people make more money that’s the goal of my channel so if you guys haven’t subscribed already make sure you hit the like button down below hit the notifications bell and subscribe do those things that you get

These updated videos so that you can follow along on my journey to wealth creation anyways today i’m gonna jump right into this i built this chart that allows me to easily compare a mortgage scenario compared to an investment scenario and it’s it’s really quite basic because what it allows me to do is alter the amount of the loan of the mortgage loan the interest

Rate and the term of the mortgage up to 30 years and then i can put in an extra monthly payment and it will automatically give me the two scenarios how much money it would make if i put that money towards my house or if i put that money towards long-term buy and hold dividend investment now as you guys know if you’ve been following my channel for a while you’ve

Probably watched some of my other videos on why i’ll never pay off my mortgage and how much money you can save by putting extra payments towards your mortgage now i am definitely not an advocate of putting my money towards my mortgage because i personally have a really low rate my mortgage is three point six four percent and that is extremely low so it’s easy for

Me to make a better return on the stock market and this chart that i’ve built it shows exactly the how much money i can make just to see a difference in my personal situation now a lot of people claim that we can’t make a seven percent return and of course i have proven that wrong time and time again i’ve done tons of videos on this i’ll put a link right up here if

You guys are interested in seeing another video on how to make a 7% return year after year after year and it’s why i always use 7% as my benchmark so when you open up this document for the first time i’ve set the loan amount for $200,000 the interest rate is 3.5% now this is would be fixed for the whole term now i know not all of you have a fixed rate mortgages i

Live in canada so of course we have we have to renegotiate our contract every five years and so we’re at historically low interest rates now and that’s why i’m choosing to invest rather than pay off my mortgage now that said these last couple months i actually have been making some extra payments because we just bought a new house in october so it’s only been about

Eight months and we’ve been making a few extra payments but because we know that we get absolute guaranteed return on investment of three point six four percent if we put any money towards the principal as an extra payment towards our mortgage now that said i’m not gonna do that for very much longer really this like first year there one of the major reasons that i

Have been putting money towards my house my mortgage payments and not towards the stock market my extra funds it has nothing to do with the mortgage at all actually it has to do with the stock market we’re at all-time highs and the stock market’s been going up and up and up and i’m fearful as with many others that we’re gonna see a major recession so i don’t want

To be putting money at this point in time into the stock market a ton of extra money i’ll put i’ll continue to put some in but not all of my extra money so i am choosing right now to split some of it put some towards my mortgage and some towards my investments and and this charts will help you guys determine whether or not that’s a good choice for you or whether

Or not you want to continue to put money payments towards your mortgage completely so the first thing we’re going to do we’re just going to roll through this we’re gonna look at the top section here this is where you enter your data now all of the data gets entered in the white cells so on this first spreadsheet there’s actually only six cells that we can enter

Data and that is the loan amount the interest rate and then the so as i said before my name is three point six four so i can just modify this to be three point six four percent and it will change the data now them a monthly payment also changes so if i if i had a twenty five year mortgage i would put in three hundred months here instead of three sixty and that

Would change it as well now the extra payment we can put it at zero to see what happens if we make no extra payments full-time mortgage is gonna be three hundred and four thousand eight hundred and ninety seven dollars there’s three different scenarios that are proposed in this chart so the first one a is where the the mortgage payment any extra payment that you

Put in this box this monthly payment goes towards the mortgage principal until such time that the mortgage is completely paid off then the total you would normally put towards your mortgage plus that additional money goes now into an investment to see how much money that investment can generate over a thirty-year period all of the numbers in this net worth column

Are over a 30-year period in scenario b there would be no extra mortgage payments made would just pay the mortgage as scheduled but we take our extra money that we’re putting into this white box up here the extra monthly payment would go towards the investment and at some point in time that investment is going to be worth more than the value remaining on the mortgage

And this allows us to see which one is sooner relatively easy the third one is a custom chart now this is for people that are midway through their mortgage and they want to just go through and plug in the numbers past or future that they think they want to do and you can you can split it up i’ll show you guys that a little bit later but you can have entries in either

Extra principal payment towards the mortgage or as an entry towards the investment or you could do both you could do like one hundred dollars to the investment a hundred dollars towards the mortgage and you can play with that scenario and see how much money gets made theoretically over a thirty-year period of course these are average numbers that we’re looking at in

A chart like this and it does not account for inflation or house value increase i mean really the house value doubling or tripling over 30 years has nothing to do much with how much you owe on or how much you saved on your mortgage so i don’t include that in this type of chart at all so let’s just plug in a hundred dollars as an extra payment see what this does so

It changes it from the net worth obviously $100 you’ve put in a lot more money three over 360 months you’ve put in an additional thirty six thousand dollars so of course the the value before was a two hundred thousand dollar loan value that you’ve completely paid off so that becomes part of your net worth and then the addition is the amount of income that you made

Off of that additional money that you put in so the thirty six thousand generated fifty five thousand dollars in income so you have this total of two hundred ninety one thousand in scenario b where you put the money towards the investment again this is why i built this chart because it shows the putting hundred dollars towards an investment that pays seven percent

Even when it’s taxed at twenty one and a half percent which is the absolute maximum we can pay on dividend paying income in canada in the states i believe it’s even lower so you’d have to figure that out yourself but if you were to put this money a hundred hundred bucks a month which is only twelve hundred dollars a year that’s well below the threshold of an ira

Like a roth ira or a tfsa or an isa if you’re in the uk theoretically this could easily be a zero percent tax rate in which case those numbers are going to change even more the thirty six thousand extra that you put in is going to generate eighty six thousand giving a total wealth of three hundred and twenty two thousand seven hundred and eight dollars compared to

Paying down your mortgage and then trying to catch up with the investment now of course and everybody’s gonna say well seven percent return is impossible so let’s just change this to four percent so let maybe that’s more realistic for for someone of course the four percent in the investment is greater than the mortgage rate at three point six four percent and when

We put our money towards things that pay a bigger percentage they make more money that’s just simple math you can’t argue with that so when we look at this outcome again as long as this investment return is bigger it’s minus the tax then the interest being charged then the outcome will be greater so in this case the in the person that invested rather than hang down

There mortgage made more money not a lot you know do 269,000 compared to two hundred and sixty-six thousand so it’s only three thousand dollar difference over thirty years not very much money and everybody always wants to know well when can you actually pay off your mortgage and you can see that right here in scenario a you’d have your mortgage paid off 41 months

Earlier and if you put the money into the investment you could theoretically have enough money to take that investment and pay off the mortgage in full 42 months earlier so actually a small win now if this goes to less if you’re investing in like a 2% bond or something like that then obviously the in the person that invests makes less money than the person that in

Pays down their house so really this chart has everything to do with these two numbers what is the mortgage rate and what is the return on investment minus the tax so i’m going to change this back so 21.5 they’re seven and three point five and 360 and this is on the summary page at the top you could see there’s actually four pages this is in numbers if you guys

Are using microsoft excel there’s a version available of that it’s down in the bottom but there’s a couple spreadsheets in here so the first one is going to be a and it’s gonna show you all of the payments exactly what happens it shows what the normal payment schedule would be here and then this is the scenario that we’re running so we have our normal payment would

Be eight ninety eight and in this case we’d be making that payment of eight ninety eight and then the additional payment of one hundred the payments 898 583 goes to interest 314 goes to principal it reduces the balance down by this amount so two hundred thousand minus 314,000 in this scenario that we’re running same two hundred thousand dollar balance the payment

Goes through of 898 an additional payment of $100 applies directly to this principal portion so the interest is the same five eighty three and five eighty three and the principal is greater by one hundred dollars a three fourteen this one’s for fourteen so the balance owing is decreased by a hundred dollars so five eighty five compared to six eighty five that what

That does is it crazy decreases the interest in the following month so without making that extra payment in the second month the interest will be 582 42 cents and this would be 582 and 12 cents how did a big difference now but it makes a huge difference for further along now you notice that there’s this column is red and as you scroll down it becomes blue and what

All that’s showing is that anytime that the principal portion is less than the interest portion when this payment goes through 898 more than half of it is going to interest at this point the interest has become lower so the principal portion is getting paid down faster than the interest and that’s really the secret to paying down the mortgage is getting to this

Point where when we make a payment of $900 most of it goes to principal and not interest so making that extra payment is a huge deal and of course in this scenario there’s no money going into the investments and so then the network caught the calculation on here is the addition of the balance owing minus the equity because you’ve bought a home worth two hundred

Thousand and then plus the invest number so it’s the two hundred thousand dollar loan as equity – the amount owing plus the investment value so what’s going to happen with this is because we’re making this hundred dollar payment we know that we’re gonna save twenty two thousand dollars in interest by making all these payments and when we scroll down here in month

302 we make our final mortgage payment so our mortgage is paid off fifty eight months early which is five years that’s pretty substantial to pay it off that early automatically the investment polym starts to populate so we take that remaining money that we normally make this $1,000 a month payment nine hundred plus one hundred and we’re going to take that five

Nineteen plus four seventy nine and we’re gonna put it into an investment specifically into an investment is paying a dividend of seven percent and we’re getting taxed at twenty-one percent and that can all be adjusted back on the summary page so what’s going to happen now is that this is going to start to grow we’re going to start to contribute $1,000 you can see

Some totals here we can see total amount paid we can see the total amount of extra pay the interest portion so the total interest paid the interest saved the regular mortgage payments so this 300 is the 270 plus the 30 we’ve paid off earlier by 58 months as they said before and we’ve got the principal portion is paid down to zero so this original $200,000 loan is

Worth two hundred thousand we always zero here and the investment the investment contribution we put fifty eight thousand dollars in there the dividends returned up in eleven thousand and we’ve paid twenty three hundred and tax so we have a total investment value of sixty-seven thousand so the after-tax dividend income is around eighty six hundred that’s the the

Dividend payout minus the tax that’s how this this number is calculated and on the investment contributions 58,000 note 368 here so the total net worth to sixty-seven and we can see how those numbers are generated this is just an analysis of what’s actually going on to generate these numbers now b is exactly the same it just has the hundred dollars going towards

The investment rather than the mortgage and then we’re gonna see when the investment value was is greater than the mortgage value so looking at the top again we can see the same same scenario this grey column did not change at all the the difference here in the mortgage column is that there’s no hundred dollar extra payment instead the hundred dollars is going into

The investment over here so we’re still paying monthly the eight ninety eight plus the one hundred it’s around a thousand bucks a month and instead we’re collecting dividends right away so one hundred dollars the dividend gets paid fifty eight cents thirteen cents goes to tax this is because of the twenty one percent it would be zero if it was in a tax sheltered

Account we gotta have a hundred dollars and forty six cents then we would add another hundred dollars to it we would collect the dividend about a dollar seventeen pay the taxes and end up with two hundred and one dollars and 38 cents one hundred dollars in plus the dividend minus the tax 302 so you can see how that works so in this one in this mortgage column we are

Definitely paying more interest but that’s okay because the investment over time is building more income scroll down and we look at this and right here at month two eighty seven is when the investment value is worth fifty nine thousand four sixty seven is exceeding the value at fifty eight thousand nine seventy eight so that’s why this has gone green at month to

Eighty seven now you can remember the last chart in chart a was three hundred and two months and now of course at the bottom it shows us the totals again so the payment amount 322 zero extra payments went to the mortgage the interest portion we paid a lot and interest 123 thousand in interest we’ve had zero saved interest we’ve paid off the same two hundred thousand

That we owed so we owe nothing but the but the investment put thirty six thousand in and the dividend payout has been seventy thousand and then fifteen thousand in tax so again had this been in a tax-free or tax sheltered account that wouldn’t be in there and that would actually be greater so the after-tax dividend income has been fifty five thousand dollars on top

Of thirty six thousand dollar investment so that’s where we get this total ninety one thousand dollars total money and plus the dividends collected reinvested – the cowboy gains gives this total value so this 291 is the $200,000 equity in the home – the amount owing which is a zero plus the ninety one thousand then the investment is worth that’s where we get this

Number 291 693 so total net worth of 291 these charts just show all the details of what is on that summary sheet you can play around with those numbers and see exactly what your rate of return or what your mortgage is which would work and just to make these numbers work and when it would actually be now that the third chart is really custom there’s only a couple of

Entries that you can do so the the numbers in this top left corner are pulled from that summary sheet so the only thing you can do is enter money in each individual month so you can just put in $100 here and you could say okay well what happens if i put $100 here and i put $100 here or maybe i want to alternate you do custom things we can even take it with draw

Like say there’s $1,600 in here we could put a minus in here of $1000 and we could apply that money to our mortgage instead on this side to see how that scenario might affect us so even with these simple things couple little payments scroll down to the bottom you’ve got 360 months to play with in this scenario we’ve paid off the mortgage three months earlier or

We had enough money to pay it off six months earlier depending over what we’re looking at and again this is all dependent on this rate of return so if the investment is returning greater than the interest rate on the mortgage anyways that’s it for today’s video there’s a link down below for you guys to download it you can download it either on my patreon account

From my patrons or on my etsy store as an individual purchase i hope you guys enjoyed this video i hope this becomes a useful item in your arsenal to getting a rich and let’s get rich together thanks so much see you very soon you

Transcribed from video

Spreadsheet: Investing vs Extra Mortgage payments Calculator Spreadsheet Apple Numbers and Excel By Drawbridge Finance