Pay Off Mortgage Early

If you want to own your home free and clear and you know that you are years away from being able to do it, then you should check out a mortgage accelerated ownership program. These programs will help you to pay off your mortgage faster by adding one interest free monthly payment to the premium to your payments each year. This one payment can really add up, especially since the payment goes entirely to your principal and not to the interest on your mortgage account.

So how does it work? The theory behind the mortgage accelerated ownership program is simple and easy to understand. Start with this:

There are 52 weeks in a year.

You are paid (in most cases) every 2 weeks.

That means that you get paid 26 times in a year.

In most cases, you take your 2 paychecks a month together to pay for your mortgage.

So you pay your mortgage 12 times a year – that’s 24 paychecks.

Where do the other two paychecks go? In most cases, nowhere. Those two “extra” paychecks get placed into a savings account or worse yet; they are spent as soon as they come in since they are “extra”. With a mortgage accelerated loan program, however, those two extra paychecks go right onto your mortgage to create a 13th monthly payment every year, dropping your principal balance by the full amount of a month’s mortgage payment.

There are several ways to do this kind of program, one of which is to simply add a certain amount to your own monthly payment all by yourself. The problem with this is that because you are not enrolled in any special program with your bank, you might be tempted to slack off when there are other better things to spend your money on. Unfortunately, it seems as if there is always something better to spend your money on than extra mortgage payments, and the “program” simply doesn’t work unless you are dedicated to making it work.

A better option is to find out from your bank if you can enroll in a mortgage accelerated loan program through them. They will either bill you every other week for the amount of half your normal mortgage payment, or they will deduct the money automatically, either from your bank account or from your paycheck. This will help you make the payments whether you “want to” or not, because they are coming directly out of your cash flow before you even see it.

Because there are an extra two paychecks in this kind of plan, the balance of those two payments goes directly onto your mortgage, reducing your debt. This can take a good deal of time off of your mortgage, especially if you are settled into a 30 year mortgage already, and are looking for ways to shave off a couple of years.

If your bank or lender does not have an accelerated mortgage repayment program, then consider doing it yourself. You should write out a check for half the amount of your monthly mortgage payment every time you get paid without fail. If your bank will not let you send these checks in individually, then hold onto your first check until you can send both together. Send them two at a time rather than waiting and writing out one every other paycheck, or you may start to allow yourself to slide back into only 12 payments a year.

Also check with your bank to make sure that you will not be penalized for making an extra monthly payment during the course of the year. If they are charging you heavy fees for paying “too much” on your mortgage, then it might not be worth the money that you put onto your premium because of the high cost. If this is the case, then you might want to consider refinancing to get rid of this stipulation. You will still have to pay the fees for an early repayment, but it might be less if it is done all at once, at least.

Another option, especially if you like your bank, is to warn them that you plan to refinance because of the high fees on extra payments. Ask if they would be willing to waive those fees in return for the continuation of your patronage. They might not agree, but it is always good to ask, and you might get just what you are asking for if you talk to the lending division and make your position clear. With no extra payment penalties, your mortgage accelerated loan program or the decision to accelerate your payments will help you own your home free and clear much earlier.

Pay Off Mortgage Early

Just imagine  as you’re going through your favourite coffee drive-thru this week  that a well-dressed gentleman stops and offers you $11,000 for your medium double double. Who would hesitate? We’d take the cash. It’s not so far-fetched. In fact, if you take that coffee budget and apply it to your monthly mortgage payment  a mere $30 extra per month -you could save yourself about $11,000 over the life of your mortgage.

Most of us can accept the idea that we must borrow money to purchase a home. We look for the best mortgage, and then just keep doling out the money for as long as it takes to pay it off. Most Canadians choose to amortize their mortgage over 25 years. That’s a long financial commitment, and it could more than double the cost of your home. But with good planning  and a few smart tactics  you should be able to enjoy your mortgage-burning party much earlier.

Here are a few strategies for fast-tracking your mortgage:

1. Increase your monthly payments. Rather than choosing your amortization period first, ask yourself how much you can afford each month. For example, you may feel that you can afford $1,000 per month. You’re delighted when your $125,000 mortgage only demands an $800/month payment (at a 6% interest). But make a monthly payment of $1,000 instead, and you’ll shave 8.75 years and almost $46,000 off your total interest cost.

2. Take advantage of lower rates. In addition to reducing the overall interest component of your mortgage, you can take the opportunity to pay down more principal faster  simply by maintaining your original payment. You should even increase your payment if you can, to reap the benefits of the cheapest mortgage money in memory. Again, you could take years  and thousands of dollarsoff your ontario mortgage.

3. Tie mortgage payments to your pay schedule. Many Canadians are paid on a bi-weekly schedule. If you accelerate your payments to bi-weekly instead of monthly, you could improve your own cash flow and fit in an extra payment each year. That means that you’re paying off principal faster  leaving you with less interest to pay overall. It doesn’t seem like much but  like putting your coffee budget to work  the bi-weekly strategy can have you mortgage free four years sooner, with almost $22,000 in savings.

4. Use any bonuses, tax refunds or “found money” to pay down principal. This is especially valuable in the early years of your mortgage. If you receive an annual bonus or other lump-sum compensation, see if you can put it against the principal. An extra $1,000 per year is a great way to fast-track to mortgage-free!

5. Consolidate your loans into a new mortgage and use the savings to boost your payments. If you’re a homeowner with some equity, you can use your mortgage to consolidate your other loans: student loans, car loans, etc. Add the money you’ve been spending on loan payments to your mortgage payments, and you could see big savings in overall interest.

With ontario mortgage rates at historic lows, you should take the opportunity to get an expert mortgage analysis from an independent mortgage broker with access to mortgages from a wide spectrum of lenders. You’ve got a great opportunity to put some fast-track tactics in place. You’ll remember what a good decision you made at your mortgage-burning party.

Pay Off Mortgage Early

I was recently asked about a mortgage acceleration program. The idea behind them is to join the program and pay off your house 2 or 3 years early, and save a bunch of money on interest. But what are they, and do they really work?

Most mortgage acceleration programs use the same basic principle. If you stick to it, you will actually pay off a 30-year fixed-rate mortgage in about 27 years, and as a result, you will save a few thousand dollars in interest payments.

As to how they work, the idea is very simple. For a fee, the companies will usually break your mortgage payment in half and have you pay it every two weeks, rather than one full payment every month. This tends to work out good for those of us that get paid every two weeks or every week. While making half payments every two weeks, the program actually forces you to make one extra full payment every year, thereby paying off your home early.

The process is simple, but is there a better way? Yes, there is.

Each of these programs usually charges you a fee to set the program up with your bank, and then another fee each time you make a payment. While you will come out ahead in the end (most of the time), you can really do this on your own without paying someone else to set it up.

If you want to make an extra payment each year, there are a few different ways to do it. If your mortgage payment is $1,200 per month for instance, divide it by 12 to get $100. That is how much extra you need to pay each month to equal an extra payment.

If you have paid weekly or bi-weekly, you can also take a portion of your extra two paychecks (26 paychecks at bi-weekly instead of 24), and apply that to your mortgage payment that month. By doing it on your own, you will save yourself the fees and keep the ball in your court. Of course, the good thing about any program is that when you are set up on it, you receive that bill every two weeks and you are liable to pay it on-time. Can you trust that you will have the will power to do it on your own with a bill telling you to?

As with anything financial, always make sure that you do things in the proper order. To view the seven Financial Freedom Steps, Visit www.lukascoaching.com/resources.htm and download it for free.

Pay Off Mortgage Early

Just a few days ago, someone asked , “How Can I Shorten The Years of My Mortgage?”

Indeed that is the key issue here, and that’s what I intend to briefly explain to you here. I won’t dive deep into all the details, but I’ll give you a quick response here.

Why Mortgages Last So Long In The First Place

To begin to see how you can dramatically shorten the years of your mortgage, we have to look at 2 things: principal and interest.

I’m sure you know what these 2 are, but let me re-establish something here so that you know where I’m coming from: As long as there’s always a remaining balance on your owing of the principal, you’ll always have payments to make, no matter how low the interest rate is.

Keep that in mind.

The real problem in a mortgage is the principal.

Having said that, have you ever asked yourself how your monthly payments are being allocated toward your principal and the interest?

That is, what portion of your monthly payments go toward cutting down the principal, and which portion goes toward the interest?

Though I don’t know your exact situation, I can wager that if you’re in the US, what happens is the overwhelming majority of each payment goes toward your interest, NOT your prinipal.

A few weeks ago, one of my friends told me that one of his friends was furious to learn that, of each payment he was making, only about $50 was going toward lowering the principal.

My buddy’s friend was lucky. Most American mortgagors never find this out. That’s how we’re misled into paying for our mortgages decades longer than we otherwise might.

You see, by diverting most of each of your payments toward your interest, and mostly ignoring the principal, you’re being forced to continue to make payments for a long, long time–much longer than you have to.

Remember, we’ve established that the real problem in a mortgage is the principal, not the interest. As long as there’s a balance of owing on the principal, you’ll always be making payments.

Because the interest is calculated on the principal, any payment that goes toward the interest, instead of the principal, ensures that there will always be principal remaining.

And because the interest is calculated on the principal…

…so goes the seemingly endless cycle of unnnecessary mortgage payments.

How To Shorten The Length Of Your Mortgage

So the question now is, how do I put more money toward lowering the principal?

Well, I’ll tell you one thing: your bank won’t want to make it easy for you, if they’ll even allow it.

Basically, you have to find a way to make sure the majority of your montly payments are going toward your principal, and not your interest.

Proven, 6-Year Old System Has Already Shown Thousands How To Pay Off Their Mortgage In An Average Of 8.5 Years…Saving Them An Average of $21,000 A Year On Their Mortgages…Without An Increase In Your Monthly Expenditures! Get Your Copy Of The Mortgage Acceleration Report Now!

go to:www.mortgageaccelerationreport.com

Pay Off Mortgage Early

I was recently asked about a mortgage acceleration program and how they work. The idea behind the program is to pay off your home 2 or 3 years early, and save a bunch of money on interest. But what are they exactly, and do they really work?

Most mortgage acceleration programs use the same basic principle. If you stick to it, you will actually pay off a 30-year fixed-rate mortgage in about 27 years, and as a result, you will save a few thousand dollars in interest payments.

As to how they work, the idea is very simple. For a fee, the companies will usually break your mortgage payment in half and have you pay it every two weeks, rather than one full payment every month. This tends to work out good for those of us that get paid every two weeks or every week. While making half payments every two weeks, the program actually forces you to make one extra full payment every year, thereby paying off your home early.

The process is simple, but is there a better way? Yes, there is.

Most of these programs charge a fee to set it up with your bank, and then another fee each time you make a payment. While you will come out ahead in the end (most of the time), you really can do this on your own without paying someone else.

If you want to make an extra payment each year, there are a few different ways to do it. If your mortgage payment is $1,200 per month for instance, divide it by 12 to get $100. That is how much extra you need to pay each month to equal an extra payment.

If you have paid weekly or bi-weekly, you can also take a portion of your extra two paychecks (26 paychecks at bi-weekly instead of 24), and apply that to your mortgage payment that month. By doing it on your own, you will save yourself the fees and keep the ball in your court. Of course, the good thing about any program is that once you are on it, you receive a bill every two weeks, and you are held liable to pay it on-time. Can you trust that you will have the will-power to do it on your own without a bill telling you to?

As with anything financial, always make sure that you do things in the proper order. To view the seven Financial Freedom Steps, visit www.lukascoaching.com/resources.htm and download it for free.

Pay Off Mortgage Early

Accelerator loans, which are common in Australia and in the U.K., have just recently come to the United States. These special accounts encourage borrowers to apply all extra money toward their mortgages and the savings can be big.

The premise is that borrowers finance a purchase or refinance existing property using home-equity lines of credit. Borrowers then directly deposit their entire paychecks into the credit accounts.

Monthly expenses, other than mortgage payments, are funded by draws against the lines of credit, whether those are through automatic bill payments, checks, cash withdrawals or credit cards.

Even if borrowers end up not paying anything extra on the principal during a month, they still capture some interest savings because the average balances are less than they would have been with conventional loans.

Let’s say that your mortgage payment is a conventional fixed-rate mortgage at $2,000 and your monthly net income is $5,000. With the mortgage accelerator, even if you spend the $3,000 difference, your average mortgage balance for the month is $1,500 less than it was with the conventional mortgage.

That’s because the entire $5,000 is deposited in the loan account and you made draws of $3,000 for living expenses spread over the month. At a 7.75 percent loan rate, that saves you about $10 in interest expense that month.

Beginning with $10 here and there it adds up over time. Although both loan programs have annual fees of $30 to $60, the accelerator part of the mortgage lies in having all of your net pay going against the mortgage.

Closing costs on a mortgage accelerator loan are about equal to the closing costs on a conventional 30-year fixed-rate mortgage. Like any refinancing decision, those costs are a factor, and the longer you plan to be in the house the easier it is to justify refinancing your mortgage loan.

If you have the discipline you could be doing the same right now with a conventional mortgage or really with any mortgage and without the cost of refinancing. A borrower would simply need the financial discipline to use that money as an additional principal payment.

If you would just put an extra $100 to $300 or more on your monthly payment (depending on your financial situation that month) you could have the control of changing your 30-year loan down to a 20, 19, 16 or whatever you choose.

Homeowners could put together a payment plan similar to a mortgage accelerator on their own without any extra expenses. Interest savings are still available the old-fashion way by making these additional principal payments on any type of loan.

Pay Off Mortgage Early

Is the thought of making 360 monthly mortgage payments getting the best of you? Will the feeling of helplessness

just not let up?

Are you frustrated out of your mind when you think about all of the years you’ll be making those huge mortgage payments and all of the $100,000′s of interest charges that lie BEFORE YOU?

Have you tried everything from bi-weekly mortgage schemes, answering every internet refinance advertisement, sending the bank another $20 with each monthly payment, etc. to payoff your mortgage early — with little or no results?

And if you are like most Americans, you only stay in your home for an average of 5-7 years before you move to a new home. And then you start the thirty year mortgage process all over AGAIN!

How can you ever get financially ahead and pay off your mortgage if you keep beginning the process over and over again?

Well, what if your mortgage lender called you today and said something like…

“if you qualify for our new mortgage acceleration program, we would like to cut up to 18-22 years off your mortgage term. And we’re not going to change anything at all with your current payments”…

What would you say to an offer like that?

Is there even one homeowner in America that would honestly say “NO” to that program?

That’s right.

There is an easy way to payoff your mortgage in as little as 12 years or even LESS. With no refinancing your current mortgage and without sending your lender larger or more frequent payments.

That is true whatever type of mortgage that you have — even if it is a fixed or an adjustable mortgage rate, 30 or even 40 years long, whether your mortgage balance is only $100,000 or over one million. It doesn’t matter.

And if you have credit card debt that makes you feel like you are drowning in high interest rates that result in huge monthly minimum payments, you can solve that problem as well.

In fact, I would suggest getting rid of that debt before starting to payoff your mortgage debt since personal credit card debt is non deductible off your income taxes.

I’m often asked questions like, are you sure that I don’t have to get a NEW mortgage? Do I have higher monthly expenses so that I have to change my current lifestyle? Am I ever locked into anything?

The answer to all of those questions is NO!

Well why hasn’t my bank told me how I can pay off my mortgage in less than half the time it takes your neighbors?

Let me ask you? Why would they? Why would they want to stop getting 30 years of interest income (your payments) and just settle for 7-14 years of payments? It is not to the lender’s benefit to tell you how get become debt free!

Did you know that with a 30 year mortgage at 7%, that about 80% of all your mortgage payments during the first 5 years of the loan are interest.

Did you know that it isn’t until some point in the 20th year that even half of your monthly mortgage payment goes towards paying down you principle (your loan balance)?

Let me give you an example of a typical client:

Mr. and Mrs. Smith earn $3,000 combined every two weeks in take-home pay (after taxes and benefits). Their normal monthly bills (excluding the mortgage) run $3,000 each month.

They live in a home worth $250,000 with a $200,000 current mortgage balance with 25 years remaining on the loan. Their loan interest rate is 6.25% with a monthly payment of $1,539 (excluding taxes and insurance).

With this set of assumptions, how long would it take the Smiths to FULLY pay off their mortgage with this financial strategy?

Just under 10 years!!

How much interest would the Smiths save over their 30 year original mortgage plan without using this strategy?

$261,700

So they saved over a quarter of a million dollars in interest and saved years of writing and mailing those hefty monthly mortgage checks! After paying off their mortgage, they get to keep that $1,539 payment every month and use if for their kid’s college or to prepare for retirement, travel or whatever they want!

All with no re-financing and without sending larger or more frequent payments to the lender. They were never locked into anything and retained complete flexibility.

And your interest savings could be much much more — especially if you have a jumbo mortgage or have a higher interest rate.

There’s an old saying that those who understand interest, collect it while those who don’t… pay it!

To learn more about how you can pay off your mortgage quicker than you ever thought possible, please visit the website listed in the author BIO box.

Pay Off Mortgage Early

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.  

Pay Off Mortgage Early

Is it really possible that you can pay off a 30-year mortgage in less than 10 years…

…without refinancing…

…without necessarily increasing your total monthly expenditures…

…and without debt consolidation?

Yes, it is! Thousands of home owners have learned that it can be done!

This may seem to be too good to be true at first, and you may not easy accept what we share with you here; because we’re all conditioned accept the status quo. The banking industry truly doesn’t want you to know our method. They would rather that you pay your mortgage payments over a long period of time, so they can maximize their profit, at your expense.

In this article, we’re going to spill the beans, and reveal some of the secrets the banking industry has been keeping from us far too long!

If you want to pay off your mortgage as fast as possible, it benefits you a great deal to find a way to put extra funds toward the outstanding balance as soon as possible. But to do this doesn’t mean you have to spend more than you already spend per month. It’s actually the method of payment that will save you the most money! And we’re talking about huge savings!

Where do the extra payments come from?

Even a little extra money paid in the beginning pays huge dividends in the long run; because the huge interest charges early in the loan really cause whirlpools in the bottom line! Most home buyers aren’t aware that they can easily lower their interest cost, and apply a lot more to the principal instead. Far too many home buyers fail to make the simple corrections! Although once we see the significance of paying down the principal, and follow our proven method, they get on track to pay off their mortgage very early; often in as little as 8 1/2 years.

Front-Loaded Interest: A Big Reason You Haven’t Been Able To Pay Off Your Mortgage Quickly

If you take a look at your mortgage amortization table, you’ll discover something very interesting. I’ll just lay out the facts for you here, using the example of a $150,000 30-year fixed-rate mortgage at 6% APR.

In the first year of your mortgage, you pay $10,791.96 (12 monthly payments at $899.33), and a whopping $8,949.89 of that goes to the bank for interest, NOT the principal.

That’s a whopping 82.93% of your payments that went to interest… flushed down the toilet, and into the banks’ pockets. That’s your hard-earned money going bye-bye, since it doesn’t pay off your loan at all!

Of your first year payments, only 17.07 % applies toward the real problem – the principal, that stands in your way of paying off your loan.

The sad thing is, even though you paid $10,791.98 on your $150,000 mortgage, the principal still stands at $148,157.98.

That means that the equity you’d have in your home would be $1,842.02. You “invest” $10,791.98, and get back only $1,842.02. (That’s an effective interest rate of over 500% in that first year.) To come up with that number, we must understand that we paid close to $11,000.00 to end up with a measly $1,842.00 in equity. Yikes! The effective interest charged by the bank reducing the bottom line to such a dismal level is astoundingly high!

This is a prime example of how your bank front-loads the interest during the first years of your mortgage. And to make it worse, most people sell, or refinance, within the first 5 years of their mortgage, making the front-loading even worse for the borrower. It helps them squeeze every dollar out of you when you start all over again.

In fact, the only way that a 6% interest is ever 6%, is if the borrower actually stays with the mortgage for the full term (30 years, in our example). Only a very small fraction of homeowners actually do this. If you sell or refinance at any time before the maturity of your mortgage, the effective interest rate you end up paying is usually much more than 6%.

So, How Do We Pay Off Our Mortgage Quicker?

It’s simple. Turn the tables on the bank! We’ve shown you how they front-load the interest. Now you know what thousands of people who are already paying off their mortgages early have learned: find a way to pay a larger portion of each payment toward the actual debt. Oh yes, it’s easy to do!

But there’s another problem.

The banks have ways of keeping this information from you. They’re just not going to share any secrets, because it would hurt their bottom line. So they they’ve laid out a minefield to make it very difficult for the home-buyer to reverse damaging trend of front-loading.

But take our word for it: there is a way, – a method – to legally, and easily, maneuver through this minefield, and pay off your mortgage in a fraction of the time. Thousands of home buyers have learned what you can learn with us, and are already doing something about it!.

Pay Off Mortgage Early

One of the most controversial subjects to hit the information highway in the last few years is the development of equity accelerator programs or the use of software to facilitate an early mortgage payoff. It seems that everyone has an opinion about these new mortgage principal reduction programs as to whether they are a mathematically legitimate and viable method of accelerating the payoff of mortgage and other debt.

The proponents of the mortgage accelerator programs claim that they will enable homeowners to pay off their existing mortgage in a fraction of the normal time by utilizing mathematical formulas or algorithms which direct cash flow and discretionary income to offset the principle and interest associated with conventional mortgage amortization.

Yet the math they are able to demonstrate can be found in a common mortgage amortization calculator.

The opponents contend these programs do nothing that one can’t accomplish on their own and that the cost is, therefore, unjustified.

The most critical commentary seems to come from individuals in the mortgage industry. Are they speaking from a sense of altruism or is their vehemently negative position an inadvertent testament to the effectiveness of mortgage acceleration analysis software?

Still more albeit less aggressive criticism comes from the professional ranks of financial advisors. It is more of a conceptual argument that one should direct their financial resources into investment strategies rather than toward mortgage reduction strategies.

If you are able to earn an 8% return, it would make mathematical sense to grow that account rather than pay off debt at 6%, but does the arbitrage argument assume a higher rate of return on the investment than were likely to see these days? Also, is arbitrage, the process of investing borrowed money, something that the average American family should feel comfortable in doing in a volatile market?

So, all that one may need in the way of validation that these mortgage acceleration software programs work is the volume of protests from those who work on the other side of the balance sheet.

If you look at how these programs work, it becomes clear that it’s not voodoo, magic, or part of the financial bail out plan. It’s just our money paying off our debt. Could we accomplish the same thing ourselves? Possibly so, however, most of us don’t.

The concept of mortgage acceleration is only part mathematical. The balance of the concept is more behavioral in nature.

We all know that, in order to lose weight, we need to stop eating so much and exercise more. Yet there is a billion dollar weight loss industry that is thriving despite this physiological fact.

Perhaps the key to mortgage acceleration software programs is that they show us how to make better financial decisions. Take the concept of virtual interest, for example. If we have a mortgage, we pay virtual interest on everything that we buy. The $5 we spent at Starbucks this morning could have been sent to pay down the principle on our mortgage. Rather, we chose not to do that and so will pay virtual interest on that $5 for the next 20 or 30 years. To our balance sheet, there is no difference between virtual and actual interest.

Had we known that the true cost of that cup of coffee was $30; would we still have bought it? These programs put our normal cash flow into a format that demonstrates the effect of our discretionary spending and forces us to make better buying decisions. They reinforce the good decisions by giving us positive, goal oriented feedback. They negatively reinforce the bad decisions by visibly adding time to our sentence of debt.

Had we all been given a proper financial education, then we wouldn’t need mortgage reduction programs and the points made on either side of the issue would be moot. Instead, we were taught chemistry and algebra and so, the controversy will continue.