Wouldn't it be nice to be debt-free? The American dream of homeownership has traditionally come with a 30-year mortgage. Add to that credit cards, car loans, college tuition, and the average consumer is drowning in debt. Over the last few decades this has become our way of life, buy now, pay later.
But with the dramatic meltdown of our financial industries over the last few years, people have begun to make a paradigm shift toward reducing debt rather than getting in deeper. Since the mortgage is typically the largest and longest-term debt people have, it is an appealing target to eliminate. The big question is, what is the best way to do that?
Logic will dictate that in order to pay off a loan faster, you either have to make additional payments, or pay more than required for each payment. So in order to make this work you have to have some discretionary income. We need to start realizing that if we pay off our debts faster, we not only save a lot of money in interest; we save more money than we pay in.
For example, if I send in an additional $5000 with my first payment on my 6% $200,000 30-year mortgage, that will save me $28,304 in interest. When I take out my $5000 payment, my net savings will be $23,304. It also shortens my 30-year mortgage by 22 months. I can continue doing this over and over, as I do the time and money savings compound.
But will I have the discipline to do that when the great deal on a new 60" HDTV comes along? And does it make sense to put all my discretionary income toward my debt, even if I have the self-control?
This is where a good mortgage acceleration program comes in. By utilizing financial concepts that have been used by Fortune 500 companies, you can dramatically reduce the amount of interest you pay, as well as the time needed to pay off your debts. With this strategy you don't have to make large changes to your spending habits; you merely change the way you do your banking. Homeowners can pay off their mortgage in only 6-15 years, and save tens of thousands of dollars in interest. And you don't have to stop there; you can include any other debts you have in the program.
You can factor in building up an emergency cash fund of three to six months income -- something that financial planners universally suggest. And yes, if you just have to have that 60" HDTV you can even include that in the program! Yet doing so will show you the ramifications of that choice in terms of how much longer it will take you to get out of debt. And possibly when you see the difference, you may decide that your old 42" is perfectly fine.
Obviously the more things you want to do, the more discretionary income you will need or the longer it will take. But using this program allows you to test different scenarios and see the results for yourself! The program contains an algorithm that systematically creates the highest interest savings possible in the least amount of time. Each individual, due to the uniqueness of their situation, requires a custom plan to achieve optimal results. Plus, if you make additional payments on a conventional 30-year fixed-rate loan, you can't borrow that money without taking out a home-equity line of credit or a home-equity loan. With the mortgage accelerator program, you already have the line of credit in place. That gives homeowners confidence that they can be aggressive in paying their mortgages and still have money readily available if a financial emergency comes up.
Using the example of the 6%, $200,000 30-year mortgage, you could save over $160,000 in interest charges by using a mortgage acceleration program. This is what I call preventing an unintentional wealth transfer, where you transfer your wealth to the bank. Imagine what a difference you could make by investing that $160,000 into to your retirement plan rather than giving it to the bank!
For more detailed information, please visit http://www.nohomeloan.net There you can download a free white paper which includes a month by month example of the program in action, and a free trial of our mortgage accelerator program. You too can become debt-free!
Garry Richardson is a licensed insurance agent and annuity specialist in Washington State. He is also licensed as a mortgage originator in Washington, and a real estate agent in California.