Kicking Your Mortgage into High Gear

My husband and I bought a house last September. Shortly after, we started receiving all kinds of promotions in the mail. Gift certificates for Lowe's and the Home Depot, policies promising protection (if you die tomorrow, we'll pay off your home loan!), etc. Most of it went into the recycle bin, but I did find one offer of value. It was an advertisement for something called Equity Acceleration. We didn't sign up for it right away, but I wish we would have! We will significantly reduce our loan's interest, gain equity at a faster rate, and knock years off of our would-be 30 year loan.

HOW IT WORKS

Most people I know do not get paid monthly. In most of our jobs, my husband and I have been paid weekly, bi-weekly, or twice per month (ex: the 1st and the 15th every month). Currently we are paid bi-weekly.

Now let's say our monthly mortgage is around $2,000 per month (just as an example). With the EAP, we'll now pay $1,000 every payday instead. In our case, our payment is automatically withdrawn the day after every payday. Now, those who are paid bi-weekly probably know that there are two months per year in which there are three paydays (typically months with 31 days in them). So in those months we will pay three $1,000 payments instead of two. The extra payment is applied only to the principle of our loan. By doing this two times per year (in those months in which we receive an extra paycheck), we will be making one extra full payment toward our principle, without any strain on our budget.

By making only one extra payment on our principle per year, we now:

- Save over $40,000 in interest over the life of our loan,
- Build over $10,000 more in equity in 10 years, and
- Reduce our loan term by up to approximately 6 years!

Although our budget is tight, we didn't even notice the change. If anything, it makes things easier because they really did tailor our due dates to fit our paydays. And what a dent we'll be putting into what seemed like a never-ending loan!

I would definitely recommend speaking to your mortgage company and finding out if they offer a similar program that will work for you.