Mortgage Acceleration Program
Mortgage Acceleration (MA) is a way for real estate owners to take possession of the title to their property sooner. In the recent years, with the mortgage lending business in turmoil, many real estate owners have opted for alternatives in trying to pay off the mortgage early. It works for both homeowners or investors. Visit Your Property Abroad to get a property on sale now.
MA is based on a money management concept that has been used in Australia for the last 20 years or so. By using a HELOC as one’s main “checking” account, interest costs are reduced by putting as much money toward the principal as soon as possible, which in turn facilitates early payoff of mortgages.
Companies like UFirst use a software called Money Merge Account, which sets up a schedule via a software program for the user and automates the whole process.
Basically the concept is that if you pay into a mortgage in a certain way, without decreasing your living expenses, the simple act of using a different mortgage tool with a different payment schedule will allow you to pay down your debt about 3 times faster.
Under regular circumstances, when a paycheck goes into a bank account, it sits there and waits, earning less than 1% interest while your mortgage payment has to be paid at an average of 5 to 9% interest. Now, since a 30 year fixed loan is amortized, it wouldn’t occur to us to pay it down any sooner than later, so we just wait until the 1st (or the 15th) of the month rolls around and take the money from our checking account and put it toward our mortgage.
Personally I believe that you can establish a Do It Yourself Mortgage Acceleration schedule, by following one of these 3 easy options:
1. Ask your mortgage lender if you can go onto a bi-weekly plan, meaning that you will make half of your mortgage payment every 2 weeks. It is usually free or there could be a nominal fee.
2. Pay more than the minimum to help pay down principal – whatever you can afford can go a long way by cutting down time and money from your loan’s life.
3. Send in an extra payment when you can. Again, as for number 2 above, it can cut down on your loan considerably.
There are several online mortgage calculators that can show you different scenarios on your mortgage, by just tweaking payment amounts and schedule.
It all depends on you: if you can be disciplined in following a schedule and sticking to it, the Do It Yourself option could work very well and save you a lot of money. However, if you prefer having someone else set up a schedule for you and automate the acceleration, buying into one of the programs might be your better option.
Either way, you will save a lot of money and time on your loan by adopting one the MA techniques. I know investors who have paid off their properties in less than 10 years by just applying extra money to their principal every month, and now live off the rental income debt free.
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