Understanding Your Mortgage & How Personal Education Is Everything

Stephen S. (00:03.807)
Welcome to the show where we interview the nation’s leading real estate entrepreneurs and service providers. I’ve got a wonderful guest who have had the privilege of sharing some conversation here before we hit record. James Murphy is joining us today. He is a long term financial planning advisor, has a background in all of that world, and we’re super excited to get into what he’s excited about going on and

Just remember at Investor Fuel, we help real estate investors, service providers, and real estate entrepreneurs, 2 to 5X their businesses to allow them to build the businesses they’ve always wanted, to allow them to live the lives they’ve always dreamed of. Super excited to get into it and how what James is doing now could potentially be a beneficial tool in your tool belt as you are building your real estate empire. So with that being said, James, welcome to the show.

James Murphy- Fire My Mortgage® (00:56.607)
It’s an honor. Thanks, Stephen. Appreciate you having me on.

Stephen S. (00:59.411)
I’m super excited for our conversation today because I know some of the points we’ll talk about are going to be just incredibly valuable for the listeners of our show, people that are investing in real estate, and then possibly some people even for their own personal lives and how they can leverage some of the expertise that you’ve picked up over the years with what you’re currently doing. So before we kind of get into today’s topic, specifically our first point of how mortgages are structured today.

Could you go ahead and just give us a little bit of a background on you, how you got to where you’re at, what you were doing, and then what you found through your own personal story and how you’re helping people now through that.

James Murphy- Fire My Mortgage® (01:37.292)
Oh, absolutely. Thank you. So I’ve been in financial planning for 23 years and the full gamut from the insurance side all the way to all the investments and money management. And when people would come into the office, they oftentimes ask, I’ve got a pile of money. Should I pay off my house or should I invest it? And I would say, you know, 99 % of advisors out there are going to say invest and partially because they just don’t

really know how to structure the debt very well. We’ve never been trained in that as a financial advisor. We’re not mortgage officers and mortgage officers might not know either the best way to do it. We’ll put a pin in that. But although they’re my friends, it’s a frustration because people assume when they buy a mortgage that they’re just going to have it their whole life and most people do. And so when I learned this, I heard about it in 2008.

and it wasn’t a very good listener. And so the next day I pretty much forgot that the guy told me about it. In 2020, I was 18 years into my practice, I called the bank to see if we could drop our PMI. Before we were done, I asked the gal, by the way, how much are we paying towards our principal? For being a numbers guy, I should have known. We had been in the house for six years and less than $200 was going towards our principal. I was…

Stephen S. (03:01.512)
Hmm.

James Murphy- Fire My Mortgage® (03:02.569)
I was, to say it nicely, was shocked. And that day out of the blue, I believe God brought somebody across my path who asked me, James, did you know people are paying their homes off in five to seven years, saving, and kind of gave me the average savings. And so we ran our numbers and just doing the same thing we were doing, we could go from 24 years left down to four years and two months.

We ended up doing it in less than half that time, buying an investment property, Airbnb’d it, it wasn’t really for us. So we sold it for a profit. But then I’m like, man, this thing works so efficiently, just using the same money we already were running through our, you know, we’d have to. So I started sharing with friends, just over coffee. And like eight out of 10 people could do this. So here I am, I’m not maybe lightning quick, but I’m pretty quick.

Realizing that all these years I’m beating my head against a brick wall telling people they should max out their retirement, they need to fund their wealth, you need disability, long-term care insurance, life insurance, and all of those things, of course. Nobody disagreed with the concept of having, but most families couldn’t really afford to do everything that they felt like they should do or like the advisor recommended.

But this one thing, like if they can take care of their largest expense, their mortgage, their car loans, their student loans, their credit cards, and get that wiped out in single digit years, man, I just can’t even tell you the load that takes off of people. And then they can get about whatever their financial goals were. That was kind of a long answer there, but I mean, I’ve had people, they want to open up a food truck, they want to travel, they want to buy investment properties, they want to invest in other financial vehicles.

They just want to bring a wife home from work so she can be with the kids. It’s just so many applications. People have gone back to school because now life’s not such a strain and then they’ve built a new career that is more aligned with their callings. So how did I get here? That’s kind of the long story. It came and found me and it’s been wildly successful for the people who have engaged.

Stephen S. (05:22.323)
Love that. tell me a little bit more about that moment and that feeling that you had when you were going in there to try and lower your PMI or what that was like when you found out I’m only paying $200 towards the principal of my house and this is not good. Like what was that feeling like? then what did you learn in that process post shock of maybe some things people don’t realize about how their mortgages are structured even?

James Murphy- Fire My Mortgage® (05:52.432)
Well, I was shocked. I felt a little dumb, like kind of taken advantage of. I always try to be really honest with people. It’s not your fault, right? So even though I felt that way, I never want somebody to feel that way. Because unless you walk in with a pile of cash, the banks pretty much force you to do an amortized loan. And it’s usually over 30 years, right? And so what did I learn?

Well, I guess the first thing I learned is that all of these entities, and again, I’m not anti these companies, but the bank, the insurance company holding the PMI, the insurance company running the homeowners, whoever’s managing the escrow for your taxes and your insurance, none of these are designed to make you wealthy. I know you know that, Steve, and all of the listeners ostensibly know that in their heart that they’re not designed to make you wealthy.

But yet we just don’t know that there’s maybe a different way. So as we start to dig into it and realize, all of those factors, your property tax, your homeowners insurance, hopefully we can get rid of PMI, your principal and interest, that all of these things can be structured differently to allow your money to work harder for you so that you can get about the things that are important to you. And so…

So as far as like, you want to know how they’re structured? Like how we’re looking at that?

Stephen S. (07:23.453)
Yeah, sure. Like, what was that process like when you found that out and then looked into it deeper to then find this, you know, maybe existential reality that you were in that you didn’t even know about? Like, what, because ultimately other people are finding that out the hard way too, or never find

James Murphy- Fire My Mortgage® (07:34.786)
Yeah.

James Murphy- Fire My Mortgage® (07:41.571)
I right? So one of my first life-old moments is I love the etymology of words, the origin of where something came from. so, excuse my own, you probably know this. So the word mortgage, M-O-R-T, basically comes from French, but it’s also rooted in Latin. what’s that? The death note. It’s the same word, we mortuary, mortician, postmortem, remorse.

Stephen S. (08:01.714)
That’s no.

Death Note.

James Murphy- Fire My Mortgage® (08:11.362)
morbidity, mortality, the schedule to pay your death note is called an ammortizate. So you just kind of get an idea that maybe they never planned on us getting out of these things at all.

Stephen S. (08:24.851)
Mmm.

Stephen S. (08:30.471)
Yeah, that makes a ton of sense. And with an amortized loan, can you kind of define that even further? I know we kind of talked a little bit about like the origin, the etymology, right? Define that a little bit more like in a digestible way that somebody that’s like, okay, you’re throwing big words around, death note, what does that mean? Am I supposed to die before it’s paid off? Like, is that? Help us understand that a little bit,

James Murphy- Fire My Mortgage® (08:42.102)
Yeah.

James Murphy- Fire My Mortgage® (08:47.842)
Alright.

James Murphy- Fire My Mortgage® (08:52.226)
So prior to the Great Depression, all the decades and decades prior, banks essentially use simple interest. Simple interest is the fairest way for a lender and a borrower to transact money. It basically just says to be as simple as possible that whatever you owe today times the annual percentage rate divided by the, we’ll say the days of the year to keep it simple in conversation, but that’s all you owe today. And so when people use simple interest,

They magically paid off their houses in single digit years. Great Depression rolls around. 40 to 50 % of homes are being foreclosed on. You saw the pictures, people were living in, whole cities were like, villages were set up with tents. Government needed to step in. Was not without help from some very influential families, Rockefellers being the most recognizable name in conjunction with the Federal Reserve. And they structure something that on the surface is very philanthropic.

They saved the day. They turned the seven-year mortgages into 30-year mortgages. People could move back into their homes. mean, yay, I’m glad that they can move back into their homes. But sometimes when things have a philanthropic face to them, there’s something going on behind the scenes. And that was turning their simple interests into compounded interests. And in reality, it’s the only way. It’s the only way you can stretch a seven-year out to 30 years.

is by amortizing. to your answer, amortize means reverse compounded. So if somebody thinks about investing, and this is not an investment strategy, this is not an insurance strategy, I have to save that for my licenses, but when they think about investing, if they had a simple bond with like a 5 % interest rate, we’ll call it, coupon, every year they’re just gonna get 5,000 on the original amount.

That’s simple interest, everybody knows that. Compounded is that it just, you get interest on interest on interest and exponentially you get this curve, right? But people don’t think that borrowing is the other side of trade of investing. So when you flip that chart around,

James Murphy- Fire My Mortgage® (11:08.666)
If you use simple interest, you’re paying the least amount because you only are paying on what you actually owe. But when you are in compounded, like mortgages and car notes are and other things, you’re paying interest on interest. And worse yet, it’s spread out over for most people 30 years to the end that that last 360 payment, you have paid on that 360 times. For 30 years, you’ve paid on the same money over and over and over.

And so when people look at their amortization, some people visit with me and they’ve never even looked at it, which is okay, no shame. But they’re like, no wonder I never get ahead because 80 % of my payment is going to interest. And we’re not even talking about taxes and insurance, but just of the principal and interest payment. Like most people are 60, 70, 80 % and we can talk about nerdy numbers more if you want. And that’s going to the bank.

like no wonder it takes so long and what if just what if they can have the majority of that payment going towards their principle and what if they could pay it off in under 10 years and then whatever to do like it’s life-changing like from a financial standpoint is

Stephen S. (12:20.934)
Right.

Stephen S. (12:27.975)
Well, and so like I’ll give you a perfect example of this and then we’ll kind of segue into another talking point that we had previously discussed about just how important, you know, personal knowledge is and reading the fine print even as a kind of a in tandem talking point to that. But like, for example, I had a stint in the car business, right? And my last serious job in that, I was a finance manager.

James Murphy- Fire My Mortgage® (12:52.442)
Okay.

Stephen S. (12:56.563)
at a dealership, which was not a buy here, pay here. They did traditional financing, but their focus was high line used vehicles, high line, high mileage used vehicles. So, you know, our average car was a $20,000 BMW with, you know, 110,000 miles on it, right? Which I don’t know who would buy that in the first place, but a bunch of people did.

And I found it fascinating because when I would be turning a deal sheet over to somebody with all of the details of it on there, they’d be signing up and the only thing they’d look at was how much money did I have to put down and what’s my monthly payment to get the thing that I want, not factoring anything else into it of is it a good vehicle? Is it something that I’m gonna have major repairs on? Nothing. And right there in front of their faces with a 22 % interest rate on this car,

They were then seeing a number that they would just always read over and not a single person would see that that $20,000 they were purchasing today was going to cost them $44,000 over the extent of a seven year loan. And, and it’s, it’s almost like I almost couldn’t sleep at night because I’m like, not a single person, the entire time I was there, hundreds of cars sold, not a single person ever looked at that number of, I’m going to pay 42 grand for this car. So.

James Murphy- Fire My Mortgage® (14:03.833)
Come on.

Stephen S. (14:21.391)
And maybe they didn’t know, maybe they didn’t do the math in their head that their $450 car payment times, you know, seven years, right? You know, came out to, but how important is it for people to personally educate themselves outside of just being able to meet with a financial advisor or things along those lines? How important is that? What do you see that as, as helping people to save themselves?

James Murphy- Fire My Mortgage® (14:41.379)
No.

James Murphy- Fire My Mortgage® (14:47.711)
Man, it’s so important. mean, there is a obviously there’s a place where we do need to trust people because we can’t DIY every single thing in life. you know, we do need attorneys or legal services to draft our legal documents. Unless you’re good at the market, financial advisors are good. Unless you have a pile of cash, you need a mortgage officer. So like these people aren’t But they can’t cover everything. Last time you signed for a house, how thick was that piece of paper?

Like even the consumer can’t read everything, right? Like you’d be there literally all day long, but they do send it to you in advance now. So you should read through it. At least throw it into AI and have AI summarize it if you get a big packet like that and can’t read it and don’t understand how that is, seriously. but to your point, well, so on the truth and lending statement, there’s this little section and it is exactly what you just described with the cars, but it’s with the houses.

Stephen S. (15:17.649)
is a book.

Stephen S. (15:36.2)
Right.

James Murphy- Fire My Mortgage® (15:45.784)
I’m always gonna go back to talking about mortgages, right? And it’s total interest payment. And it shows somebody that over the course, I’ve got the stats here. So if somebody had a 6%, they would end up paying 216 % for that house. So a $500,000 home is over a million dollars. And maybe it appreciated to that, but maybe not. But the funny thing about that, and it’s in a twisted way, is they abbreviate total interest payment.

to tip and people bulk, you know, when tipping your waitress went from 15 to 20 and now it’s customary to do 25 or 30. Now I’m not gonna leave 25%, know, percent. Well, you’re given 100%, you’re given 150 % to your bank for the use of that money. But people don’t, we don’t read the fine print or we don’t understand it. And that’s like, there’s no shame in that. Find somebody who does understand.

Stephen S. (16:48.369)
Love that. That’s awesome. so how, so with reading the fine print, what are some things people can do to personally educate that? Cause even when they get the fine print to read it, right? Even when they get it, like you mentioned, you know, summarizing in, know, Chad GBT, for example, or something along those lines. But I think a big piece of it is, and even me, I’m a pretty smart guy. I’ve got a financial license to an extent. And

Even some of the times when I’d be in the insurance space, looking at financial docs, even with the knowledge of going and learning, I’d still be reading it like it was Chinese. Do you think most people don’t because it’s just hard or it’s because there’s a lack of resources for them to actually be able to personally educate themselves on what they’re getting themselves into?

James Murphy- Fire My Mortgage® (17:38.513)
Man, I almost want to say this. It’s not for lack of resources. I would have said that 10 years ago. Information is too free now. It’s at our fingertips. And this is the guy who grew up without cell phones. It’s so easy now. You can take a picture of it and say, what does this mean? Like, again, chat. But take somebody with you, like a parent or a trusted advisor that you have a history with that person or

Stephen S. (17:42.952)
Sure.

Stephen S. (17:50.952)
Yeah.

James Murphy- Fire My Mortgage® (18:07.443)
or even ask the person you’re in front of because I don’t just naturally, I’m not skeptical of people naturally. I believe that most people are in their careers to do what is right. And so ask them, what does this mean? And then ask them some more questions because they just may not have time or honestly, like I’ve learned through the years that people sometimes don’t want to know. And so tell us what you want to know, right? We want to explain that to you. Hopefully everybody in a sales role.

has a heart of a teacher, hopefully, and they’re willing to explain that to you. And if it’s not sufficient, don’t sign the frickin’ paper. If you don’t understand what you’re signing, don’t sign it.

Stephen S. (18:50.491)
Yeah, you got all that. Well, James, I’m super, super appreciative and grateful that you were able to be here and share some of this knowledge. there, is there anything else that you would want people to know about this topic? And then, and then where can people connect with you for more?

James Murphy- Fire My Mortgage® (19:08.133)
Absolutely. I would say the best information that I could give or advice is just slow down. If you have to take a day off of work, if you’re going to make an important decision, do it. mean, would people plan more for vacations than they do their own retirement. So just slow down. We try to go slow with people when we’re talking with people like we’re cramming a lot into this podcast, but we want to make sure everybody understands what they’re in and what their options are.

Stephen S. (19:25.715)
For sure.

James Murphy- Fire My Mortgage® (19:38.35)
Our website is firemymortgage.com. Don’t forget the T in the middle of mortgage. It’s silent. We are also Fire My Mortgage on every social media platform. And yeah, we’d love to connect with you.

Stephen S. (19:53.807)
Awesome. Well, everyone, hope you enjoyed today’s show and we’ll see you on the next episode. Thanks again, James, for being here.

James Murphy- Fire My Mortgage® (19:59.73)
Thanks so much Stephen. Bye bye.