Pay off your mortgage in fewer years

One strategy over the years has been to prepay an amount every month in addition to your monthly mortgage payment. That amount could be a fixed amount or increased over time as your balance decreased.

Another method was to create an amortization table for the life of the mortgage and pay the next month’s principal each month in addition to your regular mortgage payment. Early in the life of the mortgage the extra principal payment would be quite small as most of the payments early in the life of the mortgage goes to interest.
 

After the first 5 years you still owe 93 % of the initial mortgage. It takes normally nearly 21 years to pay off half of your mortgage. This is assuming you are just making just your normal mortgage payment.

A newer method for accelerating your mortgage payoff has surface in recent years and depending on your specific cash flow situation you can accelerate the payoff in perhaps 4 to 7 years the earliest or a bit longer depending on income and positive cash flow.

Of course there are some downside to the accelerating your mortgage. First that comes to mind would be the tax savings your get by deducting your interest payments each year. Fewer interest means less you can take off on your taxes. You also need to be very disciplined as well or you could find yourself with more problems.

Steps to take to reduce mortgage in less than 10 years

• Replace your conventional 30 year mortgage with a home equity line of credit also referred to as a HELOC.
• Deposit your income into your HELOC and pay your bills from there.
• Your house becomes your checking account so to speak.
• You start paying principal off from day one.
• Allows you to pay off your mortgage in 4 to 7 years.

You need positive cash flow, positive equity and high credit score above 720 maybe even higher given the fact that mortgage lenders have tighten the credit requirements.

Common problems with this approach:

1. Expecting the lender to have your best interest in mind
2. Not having a detail accounting of your financial situation from near to long term.
3. Misuse of gained equity
4. Hidden contract terms

It’s important that you have a written financial plan before undertaking this type of mortgage acceleration strategy.

There is a company that specializes in helping homeowners with this specific strategy and they are Truth in Equity. This firm does charge an initial $20 to evaluate your situation to determine if this type of program is right for you. Based on what I could find on their website it would appear that they also have additional fees, though they are not published on the website, if you wish to have them monitor your situation on an ongoing basis.

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Daniel Iuculano, AAMS CMFC