MORTGAGE ACCELERATION: The secret banks don't want you to know
The Secret Banks Don’t Want you to Know
By the end of this article, I will let you in on a secret very few people know about: how you can pay off your mortgage in a fraction of the time… and pay A LOT less interest! Better than that, I will give you my personal contact information so I can show you how to use this trick to make thousands of dollars more every month.
What You Need to Know First
A mortgage is what is called an “amortized” loan. This means that the loan is calculated using a complicated mathematical formula to lower your monthly payment. This sounds great at first, but be aware, banks don’t do it out of kindness.
With a mortgage, your payment is mostly interest for most of the time of the loan! In fact, it will take 17 years until even half of your monthly payment will be paying down your mortgage. Banks know that on average, people refinance after 7 years, starting the clock and the 79% interest all over.
Not as good of a deal as it originally sounded, is it?
Principal vs. Interest Payments of a 30 year mortgage
Let’s pretend we just bought a home with a small down payment.
Here are the important parts:
Loan amount: $300,000
Monthly payment: $1,625.13
Not bad, at first glance any way.
Here is where the banks get tricky!
Your first payment: 1625.13
Interest rate: 79.48%
Now that is NOT what most people signed up for!
Remember, we agreed to a 5% interest rate, not a 79.48%
The Sneaky Truth: You’ll have to have the same loan for 30 years to actually get the 5% interest rate you agreed to!
You may be thinking, well yeah, but the interest portion goes down over time. You would be absolutely right, but it doesn’t go down very quickly. The first year will still average a 77.47% interest rate! That is way worse than any credit card we’ve EVER seen, no matter how bad your credit may be!
Beat the Banks at Their Own Game
The answer is a “non-amortized” loan. This can be a Home Equity Line of Credit (HELOC) or even a credit card (which will still beats 79% by a long shot). HELOC loans and credit cards use a much different formula for monthly payments. If you pay them back in a reasonable amount of time, they are a much smarter loan than an “amortized” loan.
Ok, now that we have the complicated stuff out of the way, here is how mortgage acceleration works.
5 Easy Steps to Saving Hundreds of Thousands in Interest
Remember, we have a $300,000 mortgage and we put down a down payment. This gives us some equity in the home. This is what you do.
1. Take out a simple interest home equity loan for $30,000 at 5% (keep in mind that HELOCs usually have a variable rate)
2. Pay the 15,000 of that toward your primary mortgage.
3. Turn your HELOC into your banking account and deposit all of your income at the beginning of the month into your HELOC, keeping the balance on your HELOC interest rate as low as possible. You are paying simple daily interest, so if you can have a lower balance for a big portion of the month, you'll save a great deal on interest.
4. Use your HELOC to pay your monthly expenses at the end of the month and allow any surplus to remain in the account to pay down your HELOC balance back to zero. This strategy doesn't work if you're living paycheck to paycheck. You need at least some surplus at the end of every month to pay down the principle.
5. When you reach a zero balance, pay down an additional 15k from your line to the mortgage. Repeat this chunking process until your mortgage is paid off.
This isn’t just a trick to pay off your own home. It’s a way to become a millionaire!
By using little known tricks like this, you can create a massive monthly income. You can learn how with our one of a kind rental property investment strategy. You don’t even have to manage the properties if you don’t want to, you just have to learn the system. Don’t worry, I can show you the ropes and help you along the way. What you have just read is only the tip of the iceberg!
Nathaniel M. Lambert, Ph.D.
We cover this topic in our regular meetings. To see when our next meeting is fill out the form below.