This is not good advice at all.

"How to leverage yourself to another bankruptcy"

Banker: Works great for me. Now sign here, here, here, here, here...

I was very curious until you said to put it in the stock market. Then I stopped watching .

POV: someone with no money is giving financial advice

Translation: I’m going to gamble to difference and hope it pans out

Please do this everyone! I will buy your house when you are over leveraged 5-10 years from now. Thanks in advance

My husband and I put 20% down cash he saved and I saved over the years. We got in 2.9% on a 15 year fixed rate mortgage. Our purchase price was 127,900. Our original loans after down payment was 104,000. We now owe less then 50,000 after owning it little over 2 years. We have been investing in our home past year. (Debt Free). We will be mortgage free by summer of 2025. We don’t pay PMI we are beating the interest.

They always talk about the gain scenarios, but never the losses 🤦🏽‍♀️

Ah yes, an Economics graduate from the prestigious JTMBU. Just Trust Me Bro University.

Ive got an even better idea: dont buy a house just now, instead GAMBLE the money and with the gamble returns youll be rich. And if youre saying thats unlikely, studies have show that 90% of gamblers stop right before the big win, so just keep on playing cause if you stop, youll miss out big time (this is a very real study but dont fact check me please)

Gonna be smoking a pack a day staring at the wall in silence after this one

Step 1 have the $82.5k

If you listen to this man you gone f*ck around and find out… DON’T DO IT!!!

Note this only works when interest rates are low

1) Don't use this trick to buy a house you can't actually afford. Make sure you can afford the monthly payments first. 2) This only works when % return from investment is more than % interest on your mortgage. Assuming 10% returns might be a bit optimistic, but regardless, the interest rate right now is maybe 8%. If it goes much higher, this is no longer a good idea even in theory. 3) Putting up a larger down payment and investing the difference in monthly payments in stock ALSO makes you a millionaire. ~1.1Mil vs ~1.4Mil, so it's less money, but still a millionaire.

This feels like the same advice that lead to the financial crisis of 2008

And this my friends is how you end up poor with a mortgage payment…

1929 has entered the chat. 💬

I'd rather have as low of a monthly payment as possible, and get reputable tenants living with me to help pay my mortgage. I also would rather just spend less money on a home and ramp up as I have more and more cash flow. Having a more expensive property doesn't necessarily equal higher cash flow.

Im so glad people are seeing right through him just goes to show how many ppl had enough of hearing bs

i feel sorry for whoever’s done this. the bottom is coming

The problem with this is that putting that 20% down payment in is a guaranteed return. Investing in the s&p 500 has a compounded annual growth rate (cagr) of 10.5% over the last 30 years but there is a lot of volatility in between that time. Sure if you hold this downpayment money you saved as an investment in the S&P 500 for the long term you will make more money. Although, making the home payment every month lower, and not paying pmi, is most likely worth it for most people as it is a guaranteed return, and having to pay less every month as well also helps with your monthly expenses being less.

I put 39% down and paid my junk off three months ago. Now I don't have to worry about losing my job. I have 27K saved for vacation this year.

Plot twist, almost no one will actually invest the difference

Don't gamble on things you don't have

The trick here is you need that extra 82,500 or whatever to invest in the stock market already. Most people don’t

We bought a house 2 years ago and we put 50% $20000 in down payment, we felt more safe this way

One thing you forgot to consider was that the person who makes the 20% down payment can invest the $500 they save every month on the mortgage payment and the $200 they save on PMI. The present value of those 360 $500 investments and 130 $200 investments at 8% annual returns is $85,495, which completely offsets the extra $82,500 you get when going for the 3.5% down payment. tl;dr using the proper math, you won't gain anything using this strategy, and will expose yourself to more market risk in the process.

I sold two properties in 2020 and am now waiting for a house crash to buy cheaply. Meanwhile, I've been considering stocks as an alternative; do you know if now is a good time to invest? People say it's a madhouse and a dead cat bounce right now, but I still see and read articles every week about people making over $$$k in trades. Why is this so?

I mean honestly putting 3.5% down has probably worked out for most people in the years since the housing crash but you are far more likely to end up underwater compared to someone with 20%

This is a very smart thing to do if $2,900 dollars is only like 15-20% of your take home pay after taxes for lower risk so that you can bounce back after sudden income loss. Whoever can make $11,600 a month after taxes... I applaud you.

Comes back 12 months later... "My investment is down 50% and I lost my job!"

Love tiktok and youtube shorts. All of a sudden everyone is an expert in mortgage loans, bank finance rules, and house flipping.

now that he threw $82000 into the stockmarket moneypit gambling machine he will have to figure out where he will find that monthly expense that will haunt him every month with high interest. I will sleep good being poor and have a simple family life.

In theory yes but in reality no one actually ends up doing this. They spend the difference on nonsense. Pay off your mortgage faster

He said “historically 10%” 😂😂😂

I did this and I'm 40% down. No joke.

In that case, I would put 5% down and use the rest to renovate the house and make improvements. You’ll get another appraisal and the equity will be over 20% so your PMI will be gone

10% a year? That’s optimistic to say the least

My advice because it’s what it’s what I did: Put at least 20% to avoid PMI! Next do NOT even consider a 15 year mortgage; get a 30 year mortgage so that the monthly payments are lower ‘just in case’; however, you should MAKE EXTRA PAYMENTS OR ADDITIONAL PRINCIPLE PAYMENTS over time (treat it like a 15 year loan). I bought my house in 2006 and paid off in 2021 doing just that!!! Now debt free! (Credit goes to Dave Ramsey whose KZfaq and podcasts motivated me to become debt free!)

10% a year 😂

You forgot risk and human nature

If you lose your job, the pain will be much greater.

He forgot that PMI is not for the life of the loan, once you hit 20% paid you can drop it and also you can refinance for a lower rate at any time, I also wouldn't suggest putting that amount of money in the stock market alone but spreading it out into things like retirement plans and more stable investments, you could always put that money back into the property with renovations to increase the sale potential of the home or use it as a down payment on an ivestment property. It's always best to diversify your investments incase one doesn't work out so well

*JPowell enters the room* "I'm bout to end this man's whole career"

Lmao what lender ACTUALLY tells borrowers they are gonna pay all that interest😂😂😂😂 any lenders I chat with keep that a HUSH HUSH 👀😂

I’m 40, just bought my first house. Paid cash ✌️

Next he will tell us to finance all our furniture and vehicles and grocery trips and invest the difference. Glad I followed Sean, Not only was I financially free in no time, I was also bankrupt!! Financial irresponsibility is the best way to build wealth

Instead of putting a 20% down just do 100%🤦‍♂️

The study, the career, the time, the network, the investing… And none of them will have any real castles with real sheep on a real pasture prairie paradise!!?? 😮

The smart move would be to instead buy a house for 100k rather than 500k. It would be paid for. Then you can now use the cash flow you have monthly to invest. You will make and grow far more this way. Living beyond your means is why everyone is already in major debt. I own my house out right and have zero debt. I invest my money in to the future.

it is called buy a home in a growth area and then re-sell the home after the price increases significantly.

the hypothetical assumes you have the 16.5% to invest. most don’t. put 20 down, no PMI, lower monthly payment. Invest that difference over 30 years

It's downright immoral to not even mention the risks: 1) Your home loses value and you end up upside down on your mortgage. 2) You lose your job and can't afford monthly payments. 3) You lose money in your other investments. Sure, you may get rich doing this if you're riding a good economy. But in times of crisis, all of the above can happen at the same time. That's how millions went bankrupt in 2008.

A 10% rate of return isn’t average, it’s generous. Very generous. I wouldn’t use more than a 7% rate of return for the high end, and 3-4% for the low end.

Dave Ramsey has entered the chat 😅😂

Theres actually no problem with using leverage if you actually have enough money to cover the loss. The problem is most people picking to choose higher leverage is because they can’t make the upfront payment, that’s when this advice is dangerous.

Currently in Australia, interest rates for home loans are 6-7plus percent. If you "invest" in paying off the loan your earning a guaranteed 6-7% return on your money in the short term, and variable returns as rates change. This is what I call, idiot proof investing with zero risk of panic selling, impulse spending etc.

this is one of those things that seem smart in your head until the market goes belly up

He really rehearsed & recorded himself saying this w/a straight face

When you get your investment booklet. It tells you in black and white. What the stock market has done in the past is not an indication of what it will do in the future disclaimer, but you hear these people say historically the stock makes ten percent. Lol okay but the next 30 years doesn't have anything to do with the last 30.

The reason why you put more down is about keeping debt payments to sustainable levels relative to income. Its a strategy that minimizes debt in your life.

This my friends is how we end up over leveraged and the economy crashes every ten years as people accumulate more debt than they can handle. It's literally the economic cycle. People burrow too much money. Some unforseen market change happens. People can't afford the monthly payments. Economy collapses. Like clock work.

Except NOOOOOO ONNNNEEEEE follows through and invests the difference.

"By doing it this way, I will have no money for home maintenence and need to take out a loan for projects, making my payments $3,700 at 9.6%!"

I own 20 apartments and 2 restaurants and I’ll tell you what save 100k cash and get good with your credit union not a bank and you can do something in life but make sure you save 100k in cash doesn’t matter how long it takes you to save or die working for others 🤷‍♂️

99.9% of us only have the 3.5% down payment 😂

10% on average then proceeds to calculate 10% every year guaranteed

People say I’m not dumb enough to gamble. The stock market is like playing cards at poker table at a casino. You put down the money, and then you get dealt the cards the give you a then it depends wether or not you win that round or not.

Thanks. This video convinced me to put down 20% on my mortgage.

What is not calculated here is the risk factor.

Dear god please anyone watching this, do not listen to this man. This idea is only good if you are already rich AF.

"I will make x amount of millions in that time!" A quick search. House price in 1998, $125k. Same house today $1.25mil So that's a $1.125mil increase. being that you'd have to pay so much more in interest, the strategy appears to be a wash. Besides, 10% is a pipe dream. I can point to multiple mutual funds and ETFs that were supposed to outperform the market, but their year, 3, 5, and 10 year are all below 10%. More like 5%

Terrible thought process. If you invest your down payment money and go with the 3.5% option you should end up with $1M+ after at least 20yrs or so. That $2,900 mortgage is due next month though and the bank is immediately cashing out on all that interest and insurance. Your benefit is coming in 20yrs and you’re paying for it all in the present.

This is good but always....always, consider the fact that your doing math with no risk. You may lose your job, natural disaster, something breaks in your house will cost you money and hurt your projections. Always consider risk.

Or... you invest in the stock market and lose it...and still pay the extra money in interest on the home.

Past performance.... what else could be said about past performance? A world track star athlete broke his spine, he can still walk but at limited capacity. He will be unable to participate in track. Thats just one risk of going off of past performance.

I did the math u have to let that money sit there for 170 years!!!💀

Lmaooo what’s he gonna invest in 😂

I'm just gonna build me a tent in the woods and save my $$$$

Another approach: Put the extra cash into an offset account (if available). These are like savings accounts that offset the interest on your mortgage so long as you keep the money there, very common in Australia where I live and invest. I’m at the beginning of a new rental property loan and right now every $1 put in early equates to approx $3 in interest savings over the life of the loan, guaranteed, a 300% return! Hard to find a mutual fund that matches that return in the immediate, certain way of the offset. IMO, always good to put down the minimum, then drop a bunch of cash on the loan in the early years when your payments are mostly interest.

“Historically” lmaoo

This advice really depends on your current position. If the monthly payment is still below 34% of your income, then you’re okay. Money suffers from time decay, so the borrowed amount is affected by inflation during the lifetime of the debt. Across 25/30 yrs, that’s nothing and if the place is being bought in a new city that property hasn’t been massively inflated. Yeah you can lose your job, but again you can always sell the house. Look to live in a place for at least 5 yrs and you’d have some equity in the house. All these better than renting a place and paying off someone else’s mortgage. Buy a place and pay for it across 5 yrs minimum and sell. Versus renting a place for 5 yrs and having nothing

After reading comment I realized why only a handful of people are rich af. Because majority of people want to play on the safe side and doesn’t know about the leverage. That way you can not only invest in stocks or other night return investment but also can buy more homes with more cash flows. But you must know what you are doing. I have been doing this way and now I owned multiple properties and am having tenents paying down my mortgages every month. Smart money comes to smart people.

You pay MIP(mortgage insurance premium) not PMI(private mortgage insurance). MIP is required for a 3.5% down payment which is considered an FHA loan.

Man that sure would be nice if I had the privilege to opt for the 3.5% instead of it being the only option fiscally.

Depending on your level of risk appetite. If you want to buy a property (to live in, in this scenario) and invest in shares etc, you carry a lot of risk of one failing affecting your ability to finance the other. Because ur primary goal should be to build capital here, you stand to lose too much if the stock market tanks and / or interest rate shoots up like it is now and you'd be forced to liquidate one or both asset. However, if you're investing in a rental property, it'd be smart to be negatively geared, and invest your cash in shares rather than putting it towards the loan. The risk here is lower because you're mainly investing, rather than building capital. Assuming you already have equity in another property that you live in, you wouldn't be too fussed about short term stock market dips or interest rate rises, provided you're not overly negatively geared. Edit: disclaimer: I'm not a financial advisor and this is not financial advice. General personal view only. Please see a professional financial advisor for advice tailored to your own circumstances.

Interesting... I wish I can do 3.5% and PMI and invest properly...

Its better to find a place you can afford to do only 5% down and max out your payment every month at $9999 until you are out of the rest of the 15% you were planning on putting down. do bi weekly payments with 50-100 dollars extra on each payment. That way youll save way more on interest and almost cut 10-15 years off your loan.

Stock market 😂 you will never see ur money again -400k

In the end it comes down to the yield your investment makes and the risk you are willing to take.

Good idea doing this right before the recessions

Some people say this is the way to go others say pay your house off. I will pay the house off first

You can drop a 25% downpayment and then invest consistently with the extra room in your budget.

That's a really simple example in a vacuum. That's assuming someone has $100K first of all. Even of that person did, you can still put that entire amount as a down-payment. Then that's that much quicker you will pay off your house, then you can invest like you claim you will do. This way is better bc you will invest more money, also you took away a lot if risk.

Leverage is great when it works in your favor. Adjust to your own risk tolerance according to what you have to lose as well

You can actually take out that loan at 3.5% on a multi-unit (4 max) and rent out the 3 other apartments. There are some caveats, but this is one of the ways to (moderately) sustainable passive income.

Until our govt keeps Fn around and all those gains are lost and the dollar loses more of its value.

Again this Magical 10% return on your investment from Wall Street. You'll just happen to pick the same stocks as everybody else and not make that golden number, but considerably less, when you take into account every 5-7 years the market tanks and there goes your potential $1.4M. What. you do with that house it to rent it so that the income pays for your mortgage and the $82K you buy another house or two... and rent them. They all pay for themselves, and when the RE market gets hot, sell them all, cash in your profits, repeat cycle. The danger of renting is that you always run the risk of a bum tenant that will cost you in lawyers and time (you still have to pay that mortgage) before you can evict them. Some states like Florida favor the landlord, while in others like The People's Republic of New York City, they will take the house from you and you'll still be liable for that mortgage. The City favors the bums, not you.