Inner Light LLC

 After watching this short instructional video, please scroll down for NOTES

and information on other Early Mortgage Payoff options.

NOTES:

The information contained herein IS NOT tax advice, only a sharing of my understanding.  Ask your tax advisor about deduction possibilities.  It is my understanding that a HELOC is a form of mortgage, and that mortgage interest is deductible on your taxes.  It is also my understanding that interest from other loans, such as car payments, credit cards, vacation loans, etc., are not tax deductible.  When you use this system, the way I see it, IF the mortgage interest is deductible and you use the funds from your HELOC to pay off your car (or anything else) you are in effect receiving a tax benefit by using this system to eliminate any debt.  All debts can be paid off in an expedited manner by using this system.  This system gives you the ability to make EXTRA PAYMENTS on anything – it doesn’t have to be just your mortgage.

Another way of accelerating the payoff your mortgage is to make bi-weekly mortgage payments.  Don’t confuse bi-weekly payments with bi-monthly payments. 

A bi-monthly payment is a monthly payment paid twice a month (usually ½ of the mortgage payment is paid on the 15^th of the month with the other ½ being paid on the 30^th of the month); whereas, bi-weekly payments are paid ever two-weeks.  Like bi-monthly payments, the bi-weekly payments are in the amount of ½ the monthly mortgage payment.

You make 12 payments per year on your mortgage when you use the monthly payment plan (1 payment per month x 12 months = 12 payments).  You make 24 payments per year on your mortgage when you use the bi-monthly payment plan (2 payments per month x 12 months = 24 payments).  However, you make 26 payments per year on your mortgage when you use the bi-weekly payment plan (52 weeks per year divided by 2 = 26).

Using our example of $200,000 mortgage with a monthly payment of $1,199 here’s a breakdown of the annual payments toward your mortgage.

12 monthly payments of $1,199 = (12 x $1,199) = $14,388

24 bi-monthly of $599.50 (*½ of monthly payment) = (24 x $599.5) = $14,388

26 payments (1 every 2 weeks) of *$599.50 = (26 x $599.50) = $15,587

Be sure to take a look at this payment comparison to see an amortization chart that compares the example we’ve been using of $200,000 mortgage, at 6% interest rate for a term of 30 years.  I believe you’ll be surprised at the number of years you can eliminate from your 30 year mortgage as well as the amount of interest you can save – and I’m all for saving money.

Your bank and/or your mortgage company may offer an Early Mortgage Payoff Plan (EMPP), just ask -- mine does.  The plan ‘withdraws’ the amount of the mortgage payment (½ of the monthly payment every two-weeks) from your checking account. 

If your bank does not offer an EMPP but your mortgage company will accept payments every 2 weeks, simply set up an ‘automatic bill pay’ with your bank (most banks do offer automatic bill pay).

There are probably many other ways to accelerate the payoff of your mortgage (or other debt, I’m sure), but the two I’ve shared with you here are two I’m familiar with.  Of course, the internet is a great place to research any topic and if you search for “mortgage acceleration’ I’m sure you’ll get a long list of possibilities.  Also, I used an online mortgage calculator (again using an internet search) to be able to provide you with this payment comparison.

If you have information on additional ways of accelerating the payoff of debt (especially if it is as cost effective as the two presented here) please be sure to contact us and share your information so I can add it to our INFORMATION page.