Real Estate

Mortgage Accelerator: How to Pay Off Your Mortgage in 10 Years

Story Published on June 9, 2008 ⋅  Email this Story ⋅  Print this Story ⋅ Post a comment ⋅

With the current economical difficulties we are going through, we have to find ways to maximize the use of our money. To do so, you want to change the way you see money and how you can shift your habits to take advantage of every dollar you make.

For instances, many of us are ok with getting very little return on our money by having it sit in a checking or saving account with very little return. By doing this, the bank is the one making use of our money and getting richer in the process.

Another clear example is a home mortgage. In a regular 30 year mortgage, it’s not until the 20 years and 2 months mark that the principal portion of the payment equals the interest portion.

Since most American only lives in their homes between 5 and 7 years, we barely decrease the principal in our mortgage. This is so because the way the mortgage is structured heavily favors the banks since at the beginning most of the money goes to pay the interest portion.

For over two decades, homeowners in countries such as the U.K., Australia and Canada have been using mortgage accelerator programs to pay off their mortgages in 10-15 years saving over $150,000 on payments. The good news is that this type of program is now available in the U.S.

A mortgage accelerator program works without making additional payments toward the mortgage. It works in 4 simple steps:

1. At the beginning of each month, a software tells you the right amount to pay toward your first mortgage to make sure you are paying as little interest as possible. The funds for this payment come from an advance line of credit (HELOC.) By doing so, the debt in your mortgage is reduced an you move further down the amortization schedule.

2. You deposit your income in the HELOC reducing the balance on the HELOC. By doing so, you have your money working against your debt in the HELOC.

3. You charge your daily expenses on a credit card to allow your money sit in the HELOC for as long of a time as possible.

4. At the end of the month, you pay the credit card off before incurring any interest charges from the credit card company.

By doing a few changes in your financial habits, you can start making the bank’s money work for you and no the other way around. Using other people’s money (the bank’s money) is one of the surest and fastest ways to become financially independent.

Even though it may take a little to get use to the changes, you can think of the alternative; After all, how much time and effort would it take you to make the money you would save if you could pay off your mortgage in half the time?

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