This article explains the benefits of accelerated mortgage payments to a Family’s monthly budget plan. Can you afford an extra $1,000.00 mortgage payment each year at income tax refund time?…. What is the benefit if you pay the mortgage with the extra cash? Or should you spend the extra cash having fun on a family vacation that did not shrink the monthly household budget? The answer lies in the fact that the accelerated mortgage repayment of $1,000.00 delivers rewards way in excess of what you might think.

Every one knows that a regular $1,000.00 mortgage payment is divided up into interest charges and principal reduction amounts. With each regular mortgage payment from the household budget, an extra payment of $ 1,000.00, for example, is usually divided like this:

Interest Charges paid to the Bank: $800.00
Principal Payments to pay down the mortgage: $200.00

This is just an example of the split in benefits. But it is a fair example of payments made within the first few years at the beginning of your mortgage payments. The ratio for dividing these mortgage payment dollars is therefore 4:1. For every $1.00 you reduce your mortgage debt, you pay $4.00 to the Bank or Lender for their service in allowing you to use their money.

Many a self appointed finance expert often misunderstands the real impact of an accelerated mortgage pay off plan. They will refer to the gain as simply a return on the extra $1,000.00 payment, equal to the Interest rate on the mortgage itself. If the mortgage is written at 5.00%, for example, they would say that the early repayment of $1,000.00 will simply earn a rate of, maybe, 5.00% by making an extra payment on the 5% mortgage compared to the returns to be had from a Bank’s Savings Account. They analyze this alternative in a simplified manner as if the $1,000.00 were invested in a Bank’s Savings Account.

That analysis is only partly true. It ignores the leverage of the much bigger mortgage debt. A Home Owner’s gain of a 5.00% rate of return by paying the mortgage fast is just the beginning of the gain. The real gain includes much more. More powerful gains, too often overlooked, relate to the same 4:1 split of most of the early mortgage payments. With a $1,000.00 early payment from the home budget to the home mortgage, every dollar goes directly to pay down the principal of that mortgage. The split is not the customary 4: 1 split which normally occurs with the regular mortgage payment. All accelerated payment dollars become principal reduction dollars. There is no split in the benefits.

Following this example of a $1,000.00 extra mortgage payment, that early payment immediately erases about 5 mortgage principal payments. You need to understand the practical math here. If each payment reduces the principal loan amount by $200.00, then $1,000.00 will take care of five of those $200.00 principal reduction amounts. By fast paying those five principal payments early, at $200 each, approximately, you would erase as well, the five interest payments associated with them. The interest associated with each principal payment is about $800.00…. See the chart above.

You will see the picture much more clearly when you have the detailed re-payment plan of your entire mortgage loan in front of you. This detailed mortgage repayment schedule is called an amortization table. It lists the amount of each payment from the first one to the last one you would need to be free of your mortgage and to have it paid off entirely. This mortgage repayment schedule divides each payment you make to show how much of your money goes to lower the mortgage principal and how much goes to pay interest as a reward to the Lender for the use of their money. You have no real need to learn advanced math calculations and fancy algebra equations in order to figure this out. You can print an amortization schedule of your mortgage from any self respecting mortgage website. Unfortunately, few families take this simple step as an important tool to improve the family’s budget.

Here is the scoop for the average Consumer of Mortgage Loans: The total savings on such a $1,000.00 early repayment must include the $800.00 of interest savings multiplied five times. The total of your interest savings therefore for five payments is just under $4,000.00. I say approximate because, the precise calculations require those advanced math equations that the average Consumer does not need to know.

These are the true numbers Folks. A $1,000.00 extra payment on your mortgage from the household budget can save you around $4000.00. What you need to know as a Consumer is that these early repayments bring results out of proportion to what you might think. Here you are, making a $1,000.00 early prepayment on your mortgage, but your savings reach at or near $4,000.00!! That is what is referred to as the magic of compound interest.

By creating and following an accelerated mortgage repayment plan in the family budget, you can have that kind of "money magic" work for you not against you. This is one of the big Bank Secrets Consumer advocates teach. Usually such money magic works for the Bank. With the help of your own Expert, you too could turn this knowledge to your benefit instead. You will find access to these techniques at this website:

http://www.mortgage-freedom.com

In fact, in many a hard-working household of these United States and in Canada, we have no specific plan to repay the mortgage. Unfortunately, we rely on the friendly Banker to create our mortgage repayment plan for us. Why? … Because we trust our Bankers without question. As a result, Consumers pay what the Banker says we must pay and we pay for 25 to 30 years following the Bankers’ Plan for full repayment of his money, usually, our largest loan.

You just saw how to save $4,000.00 by making a one thousand dollar, ($1,000.00), accelerated mortgage payment. Returns on these accelerated payments are not 5.00% as some would have us believe. …. These returns are closer to a 300% return on the money. But the average, working, American and Canadian Mom and Pop - and Professionals too - who pay their mortgage from hard-earned dollars, do not understand how to apply that math to benefit the home budget.

One final thought is to imagine a regular tax refund of $1,000.00 that makes five extra principal payments on the home mortgage every year for 10 years. The simple answer to that is a $40,000.00 savings. But when the "money magic" of compounding enters the picture, you will find that such a plan creates acceleration in the final pay off date for complete repayment of the mortgage.

A disciplined, mortgage repayment plan can reduce the number of years that Home Owners and Borrowers must pay to end the debt. Most families with a Mortgage have no fast mortgage repayment plan at all. The few who seek professional advice and follow an accelerated mortgage repayment with discipline are rewarded with many years of freedom from a mortgage payment. They enjoy huge savings from the family budget. On the flip side, the sad truth is that the overwhelming majority of Canadian and American households condemn themselves to an extra five years, ten years, sometimes fifteen years of payments they need not make. These are years they go in month after month, week after week with huge amounts of dollars they hand over to their Banker to make payments that really are un-necessary

If you did not create an accelerated mortgage repayment plan independent of your Lender then chances are you are the victim of a Predator. Predatory lending does not only refer to high interest charges. That meaning also includes making un-necessary mortgage payments from your monthly household budget for years.

If you have a mortgage which eats up anywhere from 30% to 50% of the household income, you cannot afford to leave your family’s fortunes in the hands of those who stand to gain most from your lack of knowledge. Don’t walk, but run to get the knowledge you need in order to win in this complex field. You must get your mortgage payment planning right.

Copyright 2007 : AAA Consumer Credit Solutions: 1,866-686 (PAID) 7243

• 32 Comments

At a time when our assets are diminishing in value, perhaps the only way in which we can improve our future net worth is by utilizing a suitable debt reduction program.

There are many debt management programs on the market designed to help us improve our future financial security. A suitable strategy designed to pay off our mortgage and other debt may be the best use of our personal financial resources.

Traditionally, financial advisors have made their living on the left side of the balance sheet and have provided little guidance in terms of effective debt management.

There has been an increasing interest in acceleration planning. An acceleration plan is a set of generic instructions or a "road map" to accelerating the payoff of mortgage debt. This would include the bi-weekly payment plans, the progressive payment plans, and "snowball" or "roll-down" type plans. While these plans can be effective, they have never gained popularity as an alternative to conventional mortgage amortization.

New and more advanced innovations in mortgage acceleration programming have come onto the scene. Mortgage acceleration analysis software periodically receives financial information from the owner and develops a customized strategy to pay off the mortgage and consumer debt.

If an acceleration plan is like a road map, mortgage acceleration analysis software is like a GPS navigation system because it utilizes continuous financial data to determine where we are at any point in time and makes strategic adjustments to keep us on course.

The advantages of a mortgage acceleration software program are: - Speed and efficiency in eliminating debt. - It adapts well to changing personal financial circumstances. - It provides real time reporting of our financial progress, giving us daily motivation to stay on track. - It can strategically attack non-mortgage debt, converting the payments to liquidity with which to further accelerate the mortgage payoff.

Because of these advantages, mortgage acceleration software programs can be the fastest way to pay off a 30 year mortgage without necessitating lifestyle changes.

The benefits of using any mortgage acceleration strategy will depend on the owner having some positive cash flow. If your family, on average, makes more money than you spend, you can benefit from the use of these programs.

Those that are within the first few years of a 30 year mortgage will realize the most benefit because of the proportionately high interest payments during this period.

One of the most controversial but successful innovations in the field of mortgage acceleration is found in the "merged account" programs. This involves the combining of cash accounts with certain types of credit accounts for purposes of utilizing temporary and surplus cash flow to reduce interest costs associated with debt.

The original program was developed in Australia and calls for the combining of your checking account with a type of transactional mortgage account so that the short term liquidity of the checking account can reduce the balance on the mortgage and the interest charges accordingly.

Although this is an innovative and effective strategy, the disadvantages are that one must refinance into this type of mortgage, it has an adjustable rate structure, and it is not readily available in many states.

Another variation of this program utilizes an advanced line of credit which merges with the checking account. Specific amounts of debt are transferred from the primary mortgage into this transactional line of credit where the owner’s cash flow can affect the balance and reduce the interest charges.

The owner’s unspent or surplus income further reduces the balance over time, allowing the line of credit to absorb additional amounts of the mortgage debt until both accounts are at a zero balance.

The advantage of this variation is that the owner keeps their existing fixed rate mortgage, avoiding the refinance costs, and it is even faster and more efficient than the original Australian program.

This type of merged account system can be somewhat expensive due to the advanced programming, set up, security, maintenance, training and support which are all provided by the vendor.

These programs are fueled by short term and future liquidity. Because this is a moving target, the company can only provide very conservative payoff and savings projections. This shortcoming has led to some debate as to whether the program investment is justified.

Mortgage acceleration isn’t the solution for everyone, but for many, it can pay off the mortgage and other debt in record time and is a safe strategy to build your financial future.

By: David Haslett

Article Directory: http://www.articledashboard.com

David Haslett is an author, seminar speaker, and business leader in the Mortgage Planning industry. Find out how mortgage acceleration software can benefit your financial future at: www.fastestmortgagepayoffplan.com

• 6 Comments

It’s no secret that many homeowners are facing difficult financial times.  As a result, it’s becoming harder for many families to stay in their homes, especially if the have an adjustable rate mortgage (ARM).  So called "teaser rates" were very common a few years ago and allowed many people to buy their first home.  The problem now, however, is that many of these rates are increasing to a level that that homeowners can’t afford and often results in foreclosure.

Unfortunately, many of these foreclosures could have been prevented if the homeowner did a bank loan modification.  Mortgage companies, or lenders, do not want to own homes.  They only want to make a profit by lending people money.  As a result, it is very common for them to agree to modify the terms of the original loan to help people stay in their homes.  

Today there are many loan modification companies to choose from but it’s important to ensure that they meet certain guidelines. For example, they should be licensed by your states Department of Real Estate, offer a written guarantee and charge a fair fee for their services.  You should also check the BBB to make certain that they have not received any complaints.

• 3 Comments

How To Save Thousands by Paying Off Your Mortgage Early

Learn How to Save Thousands using a new strategy that simply applies common banking resources available to everyone to reduce your mortgage by 1/2 to 1/2 without refinancing or converting to a biweekly or taking more money out of your every day budget

FACT: Unlike about any other debt or "loan", the typical mortgage (probably yours) is front ended load to apply most of your payment to the interest for at least 1/3rd of the loan life. On a typical 30 year mortgage, 90% or so of your payments go to interest for the first 7 years!

FACT: The "6%" or quoted mortgage interest rate only becomes effective at that rate after you complete the full contracted (15 or 30 year) period!

FACT: On your 30 year conventional mortgage, not even half of your payment goes to reduce principal until after the 7th year!

FACT: Over 70% of Americans move or refinance before the end of a seven year occupancy and paying.

FACT: On that move or refinance; most Americans take some equity out and start their clock all over again!

FACT: If you had money available to make extra principal payments, you could accelerate the time where your money starts to go toward principal and you could effectively knock years of "the back end" of the mortgage.

FACT: IF you had the money, you could accelerate the mortgage pay down and save substantially.

FACT: Most Americans don’t have the extra money to make substantial additional payments.

FACT: Under The Standard System You Can’t Win

How then do you accelerate the payoff of your mortgage?

Under the standard system, we said you can make additional payments to principal.. but most people don’t have enough to do that on a regular basis. You can refinance possibly to a lower interest rate, but when you examine this option, you’ll often find that the costs associated with refinancing won’t be recovered for 3, 4, or even 5 years. And lastly, you could go to a bi weekly payment plan which is essence is a forced way to make one extra payment a year, and on average will accelerate the pay down of a 30 year mortgage by seven years.

Even with that, it’s not a win-win situation because you make two payments a month on average, but the bank sits on your first payment until the end of the 28th day, using your money, but not paying you any interest on it and only crediting you with the payment at the end of the month.

Is there an answer to the problem? Surprisingly, there is! But it takes a little knowledge (or the use of a tool that has "knowledge" built into it and can do some complex calculations. Why complex calculations? Because we’re going to follow some advice that’s been around for a very long time in successful financial transactions! What is the secret?

Use other people’s money !

In this case, the "other people" is the bank! You see, that very same bank has a tool….. well, maybe your exact bank doesn’t have one… but if not, this tool is available to most people at some bank, and it’s an open ended loan account, generally referred to as a Home Equity Line of Credit.

You need to do some independent reading because the suggested length of an article like this does not allow for a full discussion of that financial instrument, but suffice it to say, in this type of a loan interest is treated much differently. Your interest is calculated only on the average daily balance, and that balance can be changed nearly daily. In other words, if you make a payment to your principal on the 5th, you get credit for the payment on the 5th.. not at the end of the month.

We want to keep the balance on this account as low as possible, and we can do that by putting money into it that is otherwise sitting around in zero or very low interest bearing accounts. But we need to know when to put money in and take it out. Your Heloc will act like a conventional checking and banking account in nearly all respects, except it can never have a positive balance in it. If you have obtained a credit line of $10,000 you can withdraw up to $10,000 from it, but you never can put money in that would make it "store" money.

So let’s say you tap this account to make a substantial principal only payment on your primary mortgage. You’ve used "other peoples" money. For example purposes, you made a payment of 5000. Now you also have some household living expenses that equal 4000 and you wrote this out of the Heloc. Now you are "in hoc" to your heloc by 9000. You and your significant other (if you have one) or you alone… it doesn’t matter… have a monthly income (at least this month) of $6000. So you put your paycheck into your Heloc, and at the end of the month, you really only have a balance of $3000.. and that’s what you pay interest on. But you’ve killed the interest on your first of $5000. Because the first is front end loaded, depending on the year, that was really having an effective interest rate maybe of 50%.

Next month you wrote out your living expenses of $4000 from the Heloc, and as you had a negative balance in it of 3000, you owe your Heloc $y 7000. Payday again! Same $$6000, so you put it in. Balance becomes just $$1000. Month 3… same schedule for the old budget. Monthly expenses were the same $4000, and add that to the bal of $1000 you owed starting.. so you have a 5000 balance you owe the bank. Payday coming up and you know the vital fact we just stated: You can’t have a positive balance in your Heloc! If you tried to put that full $6000 paycheck in, it would not take it.

So at some time before payday, you need to transfer some funds out of the Heloc to pay down some more principal. Ah Ha.. the magic questions: When, and how much. Take a guess and pay too much from your Heloc and your "spread" of interest advantage disappears. Why not make a massive payment of $8000.. after all , you have a credit line of $10,000. And when to make it.

The answer is that if you pay too much relative to your repayment schedule, the interest of that Heloc will cancel any advantages. Ditto on the timing. While your regular mortgage payment has to be made by a certain date, or you get late charges, remember that you are not credited with payments until the end of the amortized schedule.. usually monthly. So you don’t want to put money in too soon and let the bank sit on it until they decide to credit you!

IF you had the time and patience, you could figure this all out to the penny and to the date and hour. The facts of life are that most of us don’t have these skills or the discipline, so we need some one, or some things, to give us that guidance. This is just math, not magic. Applied "numbers crunching" and what does that better than a computer! The good news: There are commercial software programs in the market today that will do this for you. Some are better than others, but we suggest you become familiar with what is available and begin to use it as soon as possible.

Will this work for everyone? No. The software will, but you need an open ended loan account, and the most common IS your Alternate Home Equity Line of Credit. Looks like a second mortgage, but is not in that it is truly open ended. By definition, to get one, you must have some equity in your home, or a home if not your principal residence. You need to have an income where your income exceeds your monthly expenses. Doesn’t nave to be by much.. as little as $$50,000 qualifies most people. And you should have a respectable credit score or rating.

In late fall of 2007 we all read about the mess the mortgage lenders are in, and in an effort to cleans themselves up, they have tightened loan standards. Even if you meet the existing criteria above, you own bank may not offer this tool to you. so shop around.

You may be able to substitute a personal line of credit. Again, shop around. As to the commercial software.. ask if it is dynamic. Does it adjust for your changing expenses and possibly income if you are self employed or paid on commission, so that each day and month, your calculations are adjusted to optimize your prompts for payment. Is it totally confidential and not move your money, but gives you full and complete control. If you change residences, can you transfer the account to a new home or mortgage? How about tech support.. is it available e 24/7? For your lifetime? From someone in the USA that you can understand? Is there a written guarantee of satisfaction? Will it reside on your PC or on a mainframe? How often is it backed up? Do you have 24/7 access? Will it provide ancillary financial advice on decisions such as true costs of major purchases?

This is only an entry level article, but it demonstrates a proven concept, in use for many years in places like Australia and the Far east; It demonstrates how you can take advantage of the spreads between when interest is applied and calculated and when principal is applied, and how with the right tools and calculations, you can truly use other peoples money to accelerate your mortgage. Typical results cut 1/3 to 1/2 off a standard mortgage.. and you don’t have to refinance or make any alterations.

We wish you well and much financial success. !

• 16 Comments

Although it’s only been in the American market for a few years, the equity accelerator is poised to take the U.S. mortgage industry by storm. It may be hard to believe, but the equity accelerator can reduce the interest paid and term of a loan by 50% or greater.

The Problem

Traditionally, lenders focus borrower attention on keeping their monthly payment "comfortable." They are careful not to mention the long-term payoff amount for a 30-year, fixed mortgage loan. The fact that total payout on a house held to term is between two and three times the original purchase price is never mentioned.

Americans move on average about every seven years. Therefore, lenders have structured their mortgage repayment plans so that almost all of the first seven years’ payments go toward interest. Very little of each payment goes toward principle.

The financial industry has also laid onerous pre-payment penalties in the $5,000 to $15,000 range on the back of borrowers. And in the past decade or so, even more creative ways have been devised to place the consumer at a disadvantage.

The notorious Adjustable Rate Mortgage, or ARM, is one of the worst. But as of mid-2008, many of these have been coming back to haunt the mortgage industry as homeowners default when ARMs adjust upward.

Consumers without question, have been foolish and gullible during the first decade of the 21st Century. But the financial industry has not hesitated to take full advantage of consumer ignorance and vulnerability.

Adding to the burden is the high level of taxation in the United States. Small business owners in particular are sometimes forced to borrow to keep them paid. Government induced inflation adds to the burden.

The Solution

The equity accelerator, also known as the mortgage accelerator, offers great potential for relieving these tensions to the benefit of both consumer and lender. There is great opportunity for creating a financial environment in which both lender and borrower may prosper.

Exactly how does the equity accelerator work its magic? The handful of companies pioneering this market each has their own unique configuration.

The bi-weekly payment plan is the forerunner of the equity accelerator. Under this system half payments are made every two weeks instead of monthly. This gives you an extra half payment every year, and shaves about 16% off your mortgage.

This is good, but it comes nowhere near the power of the equity accelerator to cut a mortgage down to size. The best plans do not require refinancing and are thus consumer oriented.

The most powerful equity accelerator plans involve setting up a money merge account in conjunction with the mortgage. The money merge account is simply a standard home equity line of credit into which the homeowner deposits all of their monthly income.

This account operates similar to a traditional interest bearing checking account with an open-end interest calculation. In addition to the monthly mortgage payment, all bills and obligations are paid from the account.

As reported in Personal Real Estate Investor magazine (March-April, 2008) the power lies in fluid movement of funds between the line of credit and the mortgage to maximize the advantage. According to Thomas Chester, CEO of United First Financial,

"the secret is repositioning regular income that is effectively idle money… The repositioning occurs when income is applied in a lump sum to the balance owing on your line of credit. This keeps the credit line balance as low as possible and significantly reduces interest charges… This means that more money goes toward paying the principal …each month and the mortgage is paid years ahead of a standard mortgage schedule."

The beauty of the concept is that it impacts all debts in the same positive fashion, not just the home mortgage. The pay-off for credit cards, student loans, car loans and virtually all other loans can be reduced by about 50% on average.

The equity accelerator concept has been in play in Australia and other countries for about 20 years. As noted earlier it is poised to sweep the U.S. mortgage industry in the next 3-5 years. This truly is a turning point — a paradigm shift — in mortgage history. As usual, the United States is the late-adopter, but better late than never.

By: Oliver Woods

Article Directory: http://www.articledashboard.com

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Learn how to exchange an old, unmarketable house for property with positive cash flow at www.sell-this-old-house.com/pay-off-mortgage-early.html, run by Dennis Woods. Discover why right now is the best market for investing in real estate we’ve seen in years, even for people with very little capital: www.sell-this-old-house.com/economic-depression.html

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