Paying Off Your Mortgage

admin — Tue, 08 Jun 2010 23:04:13 +0000

There is an idea floating around out there in the ether. Some folks are actually talking about paying off their mortgages and getting out of debt for good. Poppycock! That’s madness. What is so great about financial freedom anyway?

Face it. Your mortgage, for which you probably broke traffic laws to get to the closing, has become a ball and chain. The dollar amount of your home loan may have actually increased over the years, while the appraisal value may have gone down. This begins to look rather hopeless after a while.

Now, there are some friends of mine who claim that they do NOT want to pay off their mortgage. They say they need the tax write off. I just can’t get my mind to go there. Saving a few bucks on taxes cannot compare to owning your home outright. You must eliminate your mortgage if you really want to build wealth, which begs the question…..how?

The typical comsumer has mortgaged the largest loan he could, right? Didn’t you sit down and figure out your budget with your lender? They have formulas for this kind of thing, and we all went for it. They were right. Your mortgage is probably just the right amount to guarantee that you can make your payments….almost comfortably. By the way, they also know that you will probably be refinancing in the next 5-7 years, and that you will, indeed, never get out from under the beast that is called ” closed-ended loan with front-loaded interest”. It is a killer, make no mistake.

You have GOT to do something about it. So how do you pay off a mortgage? Simple. Just add more money. If you pay down your principle balance, they charge you less interest. If you make just one additional payment per year, you will save 5-7 years of payments at the end of your mortgage. Great. Where am I going to get an extra $1199 this year? You could scrape up $100 per month couldn’t you? Sounds fun doesn’t it? Not.

Suppose you could use someone else’s money? Would that work? Yes, I think it would. In fact, if you could apply $5,000 to principle on your 30 year mortgage, just once, you would eliminate $28,000 in interest charges. Why, if you did that several times, you could pay off your mortgage in a fraction of the time! So, who is going to let you use their money, because most of us don’t have the extra 5 grand sitting around. Ah, but perhaps you do.

See the whole time you are slaving away and making your mortgage payments, you are building equity. Not much at first, but it is happening. You also may have some built in value in your home or elsewhere. This is the beginning of leverage.

The bank has available to you, a completely different kind of credit. It is called “open-ended” credit. It is nothing like your mortgage.

Your mortgage is closed-ended credit. Money only flows in one direction. The Bank’s. You have to make full payments, on time, and you can never ask for them back. The interest is extremely loaded onto the front of the loan, so that the bank gets paid their profit first, long before you actually make progress on your part of the loan. That is why banks have the biggest, nicest buildings in every town or city.

But open-ended credit, in the form of a Home Equity Line Of Credit (HELOC) or a Personal Line Of Credit (PLC) allows you to create real cash flow. Cash flows in and out, and every time it does, the balance in the account changes. The bank can only charge you interest on the actual daily balance. So get the picture here. If you were to borrow 20 dollars today, and pay it back tomorrow, you would only owe interest on 20 dollars for one day.

If you were to borrow, say $5,000, and make a payment to the principle on your mortgage today, and then deposit your $5,000 paycheck tomorrow, what would happen? Well, you would owe the interest on $5,000 for 1 day….about $1.75 – $2.00. But you cancelled $28,000 in interest charges on your 30 year mortgage! Whoa! Does this sound too good to be true? Yes and no.

The fact is, this is just math and money. Neither of them ever sleep. If you do the math right, this idea becomes fact. The problem is, it is a lot of math. You would constantly have to be monitoring your cash flow, expenses, fluctuations, and lifestyle. Life changes all of the time. You cannot just pull a dollar figure out of a hat, and go borrow some money from your HELOC. You could easily get yourself in an expensive financial hole. It would have to be a precise number, and that number would always be changing. Boy, if only there was computer software…….

Did I mention that there is computer software that can help you do this? Oh yeah. There are several companies out there that offer software of different kinds. Some companies are just banks who want to “help” you refinance, some offer a course on how these ideas work, others are legitimate software developers. Most of them charge $3500, so make sure you pick the right one. The big names in the business are: United First Financial, Sydney Financial Group, CMG, Free and Clear, and McCory. More are popping up all of the time.

Do your own research, and make sure that you are not getting stuck with nothing more than a fancy spreadsheet. You want a tool that is responsive and dynamic and flexible with your changing financial tides.

Call these companies at their customer support centers and see how long you have to wait. You want to deal with professionals. You want live customer support for life. You want free updates. You want a written guarantee. But mostly you want the best, most intuitive, interactive, simple to operate system, and not a static piece of software with an owner’s manual. Don’t fall for a 10 year projection on your payments. Keep in mind that the optimum numbers will change as your life happens.

If you do this right, you can be debt free in 1/3 to ½ the time. You will save a fortune in interest payments. You can discover a whole new way of thinking about money, like how to make other people’s money work for you, instead of the other way around. Enjoy.

By: Marc Rosenbaum

Second Mortgage Loans Vs Home Equity Loans

admin — Wed, 18 Nov 2009 11:02:04 +0000

It’s not surprising that some homeowners confuse the terms “second mortgage” and “home equity loan.” After all, a second mortgage is a type of home equity loan. But more often than not, home equity loan is used to describe a home equity line of credit, or HELOC. If you want to take advantage of the equity that you have built up in your home, you will need to decide if a HELOC or a true second mortgage is best for you.

Make a list of what you want to know, what you need to know, and what you already know about this subject.

Before agreeing which might be better for your purposes, let’s look at some of the basics of each. A second mortgage pays out a permanent sum of money to be reclaimed on a set schedule, like your opening mortgage. Different refinancing, the second mortgage does not supplant the first mortgage. Moment mortgages are typically 15- to 30-year loans with a permanent ratio of profit. Like the opening loan, the ratio of profit and points (if any) will be based on your credit chronicle, the estimate of the home, and the flow profit ratio. While the profit ratio on a second mortgage may be a little advanced, the fees are normally poorer. Should You Pay Points?

A HELOC, however, is parallel to a credit license, and it may even involve a credit license to make purchases. Like credit licenses, profit is emotional, and the quantity you can sponge is based on your creditworthiness.

To shape the perimeter of your HELOC, lenders will look at the appraised appraise of your home and begin their calculations at 75 percent of that appraise. They then withhold the outstanding tally allocated on the mortgage. If your home was appraised at $200,000, the lender would typically look at a greatest of $150,000 or 75 percent. If you had salaried off $100,000 of your $180,000 loan, the lender would then withhold the lasting $80,000, which would mean you would have a greatest of $70,000 offered on a HELOC if you had a very good credit chronicle. Learn how to Evaluate Your Creditworthiness.

As we take a closer look, keep in mind all of the useful and important information that we have learned so far.

Your flow fiscal desires will help shape which type of loan is right for you. If you need money for a one-time price, such as edifice a new deck or paying for a wedding, you would doubtless opt for the permanent-ratio second mortgage.

But if you forecast a habitual need for further money, such as teaching payments, you may favor a HELOC. A line of credit allows you to sponge when you need the money and, if you pay back the quantities you sponge rapidly, you can store money over a second mortgage. You also need to respect your expenses routine. If having another credit license in your wallet would tempt you to waste more often, then you are not a good contender for a HELOC.

Once you make an opening determination about which loan might be right for you, you will need to argue the niceties with your lender. While second mortgages typically operation in the same mode as your opening mortgage, ranks of credit are different. Because they aspect monthly payments, you will need to analysis the keen typeset charily.

There is no famine of lenders and offers for loans and ranks of credit. Deem your desires, then store around for a lender you can faith.

If you have found our database of information on this subject useful, read some of our other topics as well.

By: Amy Shan

Mortgage second » Mortgages

Paying Off Your Mortgage

Second Mortgage Loans Vs Home Equity Loans