Pay Off Your Mortgage And Live A Debt Free Life

Filed in mortgages on Jul.23, 2009

How to pay off your mortgage question is at the top of minds of hundreds of thousands of Americans each and every single month, now that we are experiencing some severe pain with the financial market crisis. And I’m sure that this thought may have crossed your mind at some point.

The main reason that we asked the question is that we may be thinking about living debt free and saving thousands of dollars other than spending this money with the bank. And by the way paying off your mortgage is a risk free investment strategy.

And one reason we keep asking how to pay off your mortgage and still not take any action is that we’re so confused with all the choices these days we just don’t know the right action steps to take.

Making sure that you are making the most logical decision is not something you should feel bad about. After all, your home is your major financial asset.

Mortgage pay off techniques can actually be summarized into two specific strategies.

Strategy one: mortgage prepayment

The first method on how to pay off your mortgage is referred to as mortgage prepayment method. All this simply means is that you use extra cash from your pocket to pay off your mortgage faster. The most common ways is to contribute extra from your paycheck towards your mortgage each month, use the biweekly prepayment program or make extra payments whenever you have extra cash available to you.

You already know about these strategies. The key with the mortgage prepayment strategy is to make sure you have the extra cash to pay off your mortgage. With this strategy the key decision becomes whether you should use the extra money to pay off your mortgage faster or invest these savings in your 401(k) or save for your kids college education. This decision can become very confusing at times.

Two: Mortgage Acceleration

This particular method is relatively new as it has only been around for the last 10 years. Mortgage acceleration makes use of the concept of leverage in paying off mortgage faster. Some of those who have utilized this method have paid off their mortgage without changing their financial lifestyle or spending more than what they are supposed to spend.

Here’s how you can use leverage for mortgage acceleration: Lets say you have two credit cards. One has an interest rate of 2%, the other 6%. How can you pay for both of these cards and save thousands of dollars at the same time?

That’s right. You borrow funds from the credit card that only has an interest rate of 2% to pay off your debt from the other credit card. This will get you to save more or less 4% of interest and in the next 10 to 12 years, you will already have a considerable sum of interest savings.

We can apply the same strategy with a credit card towards the mortgage. Let’s assume your mortgage is at 6% interest rate. We now go ahead and open up a home equity line of credit. We deposit our paycheck into the home equity line of credit at the beginning of the month and pay the bills at the end of the month. If you set this up correctly you can convert your home equity line of credit to a 2% interest.

When everything is set up, you will be free to borrow money from the home equity line of credit and use that money to pay off your mortgage debt.

And the end result is simple. You could slash 13 years of your mortgage and save over $63,000 of interest using this one simple financial step.

And here’s the best part, you wont have to adjust your lifestyle in the process.

Home Mortgage and Refinancing

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