Difference between revisions of "Follow the Mortgage Accelerator Plus Program"
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The repayment of mortgages can be a daunting proposition. Imagining twenty or thirty years of payments on anything makes many borrowers wish there were a better way. Luckily, with mortgage accelerator programs, you can pay off your loan more quickly without placing a massive financial strain on yourself. Unlike plans that simply tack on an additional payment each year, this plan pays off your loan using money you already have. Following the plan is as easy as taking the steps below. | The repayment of mortgages can be a daunting proposition. Imagining twenty or thirty years of payments on anything makes many borrowers wish there were a better way. Luckily, with mortgage accelerator programs, you can pay off your loan more quickly without placing a massive financial strain on yourself. Unlike plans that simply tack on an additional payment each year, this plan pays off your loan using money you already have. Following the plan is as easy as taking the steps below. | ||
| − | [[Category:Mortgages and Loans]] | + | [[Category: Mortgages and Loans]] |
==Steps== | ==Steps== | ||
===Deciding to Use a Mortgage Acceleration Program=== | ===Deciding to Use a Mortgage Acceleration Program=== | ||
#Determine if a mortgage accelerator program can help you. Mortgage accelerator programs exist so that borrowers can pay off their mortgages in a shorter period of time than their mortgage originally planned for. This can save you tens of thousands of dollars on interest because total interest paid is directly tied to how it takes you to pay off the loan. This can be helpful if you want to get your mortgage out of the way to focus on other financial goals or if you simply want to save money in the long run. | #Determine if a mortgage accelerator program can help you. Mortgage accelerator programs exist so that borrowers can pay off their mortgages in a shorter period of time than their mortgage originally planned for. This can save you tens of thousands of dollars on interest because total interest paid is directly tied to how it takes you to pay off the loan. This can be helpful if you want to get your mortgage out of the way to focus on other financial goals or if you simply want to save money in the long run. | ||
| − | #*For example, imagine you have a 30-year, $100,000 loan that charges 6 percent interest. With a $600 monthly payment, your loan will be paid in full in 30 years and you will have paid over $115,000 in interest. If you paid just $100 more per month, $700, you would pay off your loan in 21 years and pay less than $76,000 in interest. This is a savings of $39,000 in interest, even though you've payed back the same amount of principal.<ref>http://www.nbcnews.com/id/15145783/ns/business-answer_desk/t/whats-mortgage-accelerator/#.VsOLbJOAOko</ref> | + | #*For example, imagine you have a 30-year, $100,000 loan that charges 6 percent interest. With a $600 monthly payment, your loan will be paid in full in 30 years and you will have paid over $115,000 in interest. If you paid just $100 more per month, $700, you would pay off your loan in 21 years and pay less than $76,000 in interest. This is a savings of $39,000 in interest, even though you've payed back the same amount of principal.<ref name="rf1">http://www.nbcnews.com/id/15145783/ns/business-answer_desk/t/whats-mortgage-accelerator/#.VsOLbJOAOko</ref> |
| − | #Choose a mortgage accelerator program type. There are basically two types of mortgage acceleration plans. One simply accelerates your payments by switching your 12 yearly monthly payments for 26 bi-weekly payments (for half your regular monthly payment amount). This does pay off your mortgage faster (down to about 22 years from 30), but is essentially the same as writing an additional monthly check at the end of the year and can cut more into your monthly income. The other type, the type discussed in this article, involves moving around your expenses in a home equity line of credit (HELOC) and credit card so that you can use your existing income to pay down your loan principal.<ref>http://www1.cbn.com/should-i-use-mortgage-accelerator</ref> | + | #Choose a mortgage accelerator program type. There are basically two types of mortgage acceleration plans. One simply accelerates your payments by switching your 12 yearly monthly payments for 26 bi-weekly payments (for half your regular monthly payment amount). This does pay off your mortgage faster (down to about 22 years from 30), but is essentially the same as writing an additional monthly check at the end of the year and can cut more into your monthly income. The other type, the type discussed in this article, involves moving around your expenses in a home equity line of credit (HELOC) and credit card so that you can use your existing income to pay down your loan principal.<ref name="rf2">http://www1.cbn.com/should-i-use-mortgage-accelerator</ref> |
| − | #Never pay for a mortgage accelerator program. There are many plans and programs out there that charge for arranging this type of mortgage acceleration. In some cases, this can be very expensive. Know that you can plan and budget out your own mortgage acceleration plan without paying for these scams.<ref | + | #Never pay for a mortgage accelerator program. There are many plans and programs out there that charge for arranging this type of mortgage acceleration. In some cases, this can be very expensive. Know that you can plan and budget out your own mortgage acceleration plan without paying for these scams.<ref name="rf2" /> |
| − | #*For example, one of these plans might cost you an initial $300 fee and then $65 per year for the life of your loan. These fees are unnecessary, as you are paying for something you can do yourself.<ref | + | #*For example, one of these plans might cost you an initial $300 fee and then $65 per year for the life of your loan. These fees are unnecessary, as you are paying for something you can do yourself.<ref name="rf1" /> |
| − | #Decide whether or not acceleration is your best option. Mortgage acceleration will invariably reduce the amount of money you are able to spend each month. While this will help you get out of debt faster, it may interfere with your other financial goals. If you're also in another type of debt, like credit card debt, paying that off should be your priority before taking on a mortgage acceleration plan. Alternately, you may have a large savings goal, like saving for your child's education. Consider your priorities before deciding on this type of plan.<ref>http://www.nodebtplan.net/2009/04/01/avoid-mortgage-accelerator-programs-like-the-plague/</ref> | + | #Decide whether or not acceleration is your best option. Mortgage acceleration will invariably reduce the amount of money you are able to spend each month. While this will help you get out of debt faster, it may interfere with your other financial goals. If you're also in another type of debt, like credit card debt, paying that off should be your priority before taking on a mortgage acceleration plan. Alternately, you may have a large savings goal, like saving for your child's education. Consider your priorities before deciding on this type of plan.<ref name="rf3">http://www.nodebtplan.net/2009/04/01/avoid-mortgage-accelerator-programs-like-the-plague/</ref> |
===Implementing the Program=== | ===Implementing the Program=== | ||
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#*In March, you would pay the regular $1,000 mortgage payment, pay your standard $2,000 monthly expenses, finish paying the HELOC with $1,000, and then have an additional $1,000 in positive cash flow left over. | #*In March, you would pay the regular $1,000 mortgage payment, pay your standard $2,000 monthly expenses, finish paying the HELOC with $1,000, and then have an additional $1,000 in positive cash flow left over. | ||
#Repeat as desired. With your HELOC payed off, you can continue the process of putting your paycheck into your mortgage (that is, restart the process you've just completed). Put your entire paycheck into mortgage again and repeat the process from there. Every time you do, you will reduce your loan principal more quickly and accelerate your repayment. | #Repeat as desired. With your HELOC payed off, you can continue the process of putting your paycheck into your mortgage (that is, restart the process you've just completed). Put your entire paycheck into mortgage again and repeat the process from there. Every time you do, you will reduce your loan principal more quickly and accelerate your repayment. | ||
| − | #*In order to do this, you can keep your HELOC open even after it has been paid off. In this way, your HELOC functions mostly like a credit card, allowing you to take out money as needed (up to a certain limit, of course).<ref>http://homeownership.org/news/happens-heloc-loan-zero-balance/</ref> | + | #*In order to do this, you can keep your HELOC open even after it has been paid off. In this way, your HELOC functions mostly like a credit card, allowing you to take out money as needed (up to a certain limit, of course).<ref name="rf4">http://homeownership.org/news/happens-heloc-loan-zero-balance/</ref> |
| − | #*In theory, you can borrow as much as 80 to 90 percent of your home equity value from your HELOC. That is, imagine that for the example $200,000 mortgage, you have a full home value of $250,000, meaning that you originally made a down payment for $50,000. If you haven't paid into your mortgage yet, this $50,000 is your equity in the home. Therefore, you could borrow 80 to 90 percent of that value on your HELOC, or about $40,000 to $45,000.<ref>http://www.bankrate.com/finance/home-equity/how-much-equity-can-you-cash-out-of-home.aspx</ref> | + | #*In theory, you can borrow as much as 80 to 90 percent of your home equity value from your HELOC. That is, imagine that for the example $200,000 mortgage, you have a full home value of $250,000, meaning that you originally made a down payment for $50,000. If you haven't paid into your mortgage yet, this $50,000 is your equity in the home. Therefore, you could borrow 80 to 90 percent of that value on your HELOC, or about $40,000 to $45,000.<ref name="rf5">http://www.bankrate.com/finance/home-equity/how-much-equity-can-you-cash-out-of-home.aspx</ref> |
#*Make sure to not repeat the process until your HELOC has been completely paid off from the previous cycle. | #*Make sure to not repeat the process until your HELOC has been completely paid off from the previous cycle. | ||
===Considering Other Options=== | ===Considering Other Options=== | ||
| − | #Think about simply staying on schedule. As previously mentioned, there are some advantages to simply staying on track with your mortgage payments. While you'll still be paying the full amount of interest and for the full duration of your loan, you will be able to meet other financial goals more easily. Instead of accelerating your mortgage, you can use your positive cash flows to pay off other debts, invest in your child's education, or save for retirement. Reflect on your goals and decide whether an accelerated mortgage plan is best for you.<ref | + | #Think about simply staying on schedule. As previously mentioned, there are some advantages to simply staying on track with your mortgage payments. While you'll still be paying the full amount of interest and for the full duration of your loan, you will be able to meet other financial goals more easily. Instead of accelerating your mortgage, you can use your positive cash flows to pay off other debts, invest in your child's education, or save for retirement. Reflect on your goals and decide whether an accelerated mortgage plan is best for you.<ref name="rf3" /> |
#Pay more each month. Instead of taking on an extreme program, simply pay more every month on your mortgage. This number can be whatever you feel comfortable with. Even an extra $50 per month can have a drastic effect on the length of your loan and your total interest paid. Prune other expenses in your life, like parts of your tv or cell phone bills, to free up this money. | #Pay more each month. Instead of taking on an extreme program, simply pay more every month on your mortgage. This number can be whatever you feel comfortable with. Even an extra $50 per month can have a drastic effect on the length of your loan and your total interest paid. Prune other expenses in your life, like parts of your tv or cell phone bills, to free up this money. | ||
| − | #*To keep yourself on track, consider setting up automatic billing from your checking account. This feature will automatically deduct the amount of your payment (your mortgage bill plus whatever you are choosing to pay on top of that) from your checking account. This will make sure that you stay on track, even if things are tight in some months.<ref | + | #*To keep yourself on track, consider setting up automatic billing from your checking account. This feature will automatically deduct the amount of your payment (your mortgage bill plus whatever you are choosing to pay on top of that) from your checking account. This will make sure that you stay on track, even if things are tight in some months.<ref name="rf1" /> |
| − | #Refinance to a shorter-term loan. If you're really serious about paying down your loan faster and have some positive cash flow to burn, you can refinance your loan to a shorter-term loan with the bank. For example, you can shorten your 30-year loan to a fifteen, ten, or even five-year loan. Of course, the shorter the loan, the higher your monthly payments will be. On the other hand, a shorter loan will also charge you less interest overall. Talk to a loan representative at your mortgage lender to learn about your options.<ref>https://www.wellsfargo.com/mortgage/mortgage-refinance/pay-off-mortgage-early/</ref> | + | #Refinance to a shorter-term loan. If you're really serious about paying down your loan faster and have some positive cash flow to burn, you can refinance your loan to a shorter-term loan with the bank. For example, you can shorten your 30-year loan to a fifteen, ten, or even five-year loan. Of course, the shorter the loan, the higher your monthly payments will be. On the other hand, a shorter loan will also charge you less interest overall. Talk to a loan representative at your mortgage lender to learn about your options.<ref name="rf6">https://www.wellsfargo.com/mortgage/mortgage-refinance/pay-off-mortgage-early/</ref> |
#*Refinancing your loan may incur new origination charges and closing fees. | #*Refinancing your loan may incur new origination charges and closing fees. | ||
| − | #*Additionally, your lower interest payments will likely mean that you cannot deduct as much mortgage interest from your income taxes each year.<ref | + | #*Additionally, your lower interest payments will likely mean that you cannot deduct as much mortgage interest from your income taxes each year.<ref name="rf6" /> |
#Pay in lump sums if and when you receive them. Another option, which is in line with any type of repayment plan, is simply putting any lump-sum payout you get into paying down your loan. This means taking any payments you receive in excess of your regular income and putting them directly into your mortgage. For example, rather than spending your tax refund on a vacation, pay that money directly into your mortgage. This is understandably unpleasant for most people, but will ensure that your mortgage is paid off in a shorter time period. | #Pay in lump sums if and when you receive them. Another option, which is in line with any type of repayment plan, is simply putting any lump-sum payout you get into paying down your loan. This means taking any payments you receive in excess of your regular income and putting them directly into your mortgage. For example, rather than spending your tax refund on a vacation, pay that money directly into your mortgage. This is understandably unpleasant for most people, but will ensure that your mortgage is paid off in a shorter time period. | ||
