How Home Owners Can Skip Through Their Amortized Schedule And Beat The Banks
Topics: mortgage, accelerated
Seven years ago I finally gave in to the real estate frenzy and signed up for a class to obtain my real estate license. I don’t have to tell you about the huge amount of business being done in all areas of the real estate market for the past eight to ten years or so. If you don’t know, you are probably not from this planet.
One friend of mine was doing very well in his own business as a mortgage broker. In fact, it was he that encouraged me to come to work for him. I had little trouble making that decision knowing just how much money his office was generating. Besides, I could work part time and continue to work my first job.
My new job description was contacting homeowners and offering them the “opportunity” to refinance their existing mortgage to obtain a better rate while paying off high interest consumer debt, or take a vacation, buy an automobile, etc. There were huge gains in the appreciation of home values and many homeowners wanted to access their new found wealth.
When I started in the business I knew nothing of mortgages, but I picked up on it quickly and had many opportunities available to me in learning about the industry. When I came to understand how mortgages were structured, I was shocked at how heavily a mortgage agreement weighed in the banks favor. To receive your interest in the beginning of the terms is a nice deal.
It will take the average home owner, with a thirty year mortgage, twenty years of payments before they reach the halfway point. That is to say, half of their payment applied to interest and the other half to principle. When you consider the average American home owner stays in their home only seven years, well that is a real nice deal for the banks. Just Google “mortgage calculator” and enter your numbers to take a look at how your term is amortized and what portion of your payment is going to interest.
However, there is a light at the end of the tunnel. You are not prevented from paying ahead of your agreed upon amortized schedule. When you pay ahead of schedule you are canceling portions of interest. You are probably wondering why I am repeating things you already know. “Sure, I can cancel interest but where is the extra money going to come from?”
This question has been answered by an ingenious individual from Australia named Harj Gill. In his best selling book “Own Your Home Years Sooner”, Harj Gill explains how home owners can cut the terms of their mortgage significantly and save many thousands in interest charges by doing so. This is done without having to refinance your existing mortgage, and without any change to your monthly budget. This is simply a powerful new approach in handling money to gain greater flexibility and economic freedom.
It is worrisome to see some homeowners who have been paying for many years on a mortgage, only to refinance and be right back where they started from. We can not expect our home values to rise any longer; in fact, the opposite is now taking place for many homeowners across America. It is time to take a sober look at what we can be doing better.
Copyright 2008 John Franco. John Franco is a man who revels in the current renaissance. To read more tips and techniques like the one in this article, please visit John here formenoverforty.blogspot.com
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