How To Beat Your Banker At Their Own Game Using Loopholes In Their Own Rules

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How To Beat Your Banker At Their Own Game Using Loopholes In Their Own Rules

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Imagine what it would be like if you could pay off your mortgage

sooner than anticipated. Sure, we all think about it, we tell

ourselves that next year we will start paying more than is

required each month, or that once we pay off the car loan, we can

put more money to that mortgage. Unfortunately, many homeowners

never seem to have that extra money to put towards their mortgage

payments.

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Distribution Date and Time: 2006-12-26 12:00:00

Written By: Jeff Spellman

Copyright: 2006

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How To Beat Your Banker At Their Own Game Using Loopholes In Their Own Rules

Copyright © 2006 Jeff Spellman

JS Real Estate Solutions

http://www.jsrealestatesolutions.com/

Many homeowners often feel that they will never actually get

their mortgage paid off in full. Part of the reason for this is

that the traditional mortgages are set up for a 30-year time

period. Picturing life a full 30 years from now, or even 10 years

from now may seem a bit overwhelming for many people.

Imagine what it would be like if you could pay off your mortgage

sooner than anticipated. Sure, we all think about it, we tell

ourselves that next year we will start paying more than is

required each month, or that once we pay off the car loan, we can

put more money to that mortgage.

Unfortunately, many homeowners never seem to have that extra

money to put towards their mortgage payments. These same people

are able to afford their mortgage payments each month, but just

never seem to have anything left over at the end of the month to

put towards an overpayment on the home loan.

If you are looking for a way to pay off your mortgage quicker

than the original terms of the loan, then there are certain

things that you need to understand.

First of all, the lender wants you to take the full 30 years to

pay off the house because the lender is earning interest from you

during that time period. If you pay off the loan sooner than

expected, the profit to the lender will be reduced. Because of

this, most lenders are in no hurry to educate you about the

methods that you can use to achieve an early pay off.

Next, it is important that you understand that the lenders use

what is called amortization to set up your repayment plan. In

this amortization the lender allocates where the money that you

pay each month goes. By this I mean that the lender allocates a

percentage of your monthly payments towards interest, and the

bulk of the remainder goes towards your principal.

In the beginning of the repayment period (first few years of the

loan), the bulk of the money that you pay the lender each month

will go towards the interest. The lender wants to make sure that

they get their profit from you as quickly as possible, in case

you default on your mortgage. If you were to pay the lender back,

at the exact rate they set up in the amortization schedule, 99.5%

of the final payment that you make to the lender would go towards

the principal. Conversely, roughly 85% of the very first payment

that you make on your house will be allocated to interest.

With amortization schedules, a homeowner can realize huge savings

on the amount of interest that they pay the lender if they make a

few changes in their payment methods. One of the changes that you

can make is to make bi-weekly payments on your mortgage instead

of monthly payments. No, you do not have to pay twice the amount

of money; you simply pay half of the payment after two weeks, and

the second half of the payment two weeks later.

An example of this would be if your monthly mortgage payment is

$1,500, you could pay $750 bi-weekly and save a huge amount of

money on the interest of the mortgage. In context, a homeowner

can literally save between $30,000 and $100,000 in mortgage

interest by making bi-weekly payments instead of monthly

payments. Every person's experience will vary, but the average

homeowner could save $60,000 in mortgage interest, all without a

need to refinance his or her home loan. The bi-weekly payment

system is perfectly legal, and it could pay you handsomely for

your extra efforts. These kinds of savings are possible, because

of the way the lenders use the amortization schedule and the way

that they allocate the money that is paid to them.

Another reason bi-weekly payments help save you a considerable

amount of money on your mortgage interest is because you would

actually be making 26 payments each year, or in other words you

would be making 13 months worth of payments annually. Right there

you have found some of that " extra " money that you never seemed

to be able to come up with that you wanted to put towards your

mortgage. In reality, you will be making one extra monthly

payment, but since you will quickly become accustomed to paying a

smaller payment every two weeks, it won't be as big of a shock

to your wallet as if you tried to come up with an entire extra

monthly payment all at once.

By considering some of these very simple changes in the way that

you repay your mortgage, you could own your home quicker,

establish equity faster, and reduce the interest that you pay to

the lender by thousands of dollars.

It is recommended that you consult a financial advisor, or other

expert to learn which repayment methods would be best for you and

current situation. They will be able to show you, via an

amortization schedule, exactly how the money would be allocated

and how you can start saving money today.

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Jeff Spellman is a financial-services specialist.

Jeff established JS Real Estate Solutions

(http://www.jsrealestatesolutions.com) to help real estate

investors and homeowners enhance their investments, protect

their assets and maximize their returns. If you would

like to save interest on your mortgage, build equity in

your home more quickly, and even pay off your mortgage

years ahead of schedule, Jeff can help. Please visit

http://www.jsrealestatesolutions.com/mortgagereduction.html

to learn more. Jeff can be reached at: 516-808-4105 or

jeff.spellman@...