Mar 13

The question of whether to over pay your mortgage or accept a low return on your money invested is an importance issue in today’s economic climate. As a money saving expert, I will explain how you can save thousands of pounds by over paying your mortgage and why it is more tax efficient than saving money in the bank or building society if you have a mortgage.

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As the Bank of England drives down interest rates in an attempt to control deflation; savers are left earning a pittance from their savings whereas some mortgage borrowers are saving hundreds of pounds in reduced mortgage payments each month. Borrowers on Tracker rate and those on the Standard variable rate mortgages have seen their mortgage costs drop drastically in some instances and they now find themselves with extra money in their pockets. The Co-operative Bank Mortgages department recently revealed that they had seen a 50% increase in mortgage borrowers making overpayment into their mortgage accounts.

What the Co-operative Bank discovered
The Co-operative bank conducted a poll of 1000 adults from their bank to expose some of the reasons why borrowers were overpaying their mortgages. It revealed that 80% of those polled declared their reason for overpaying their mortgage was due to low returns on their savings accounts; some 37% choose to pay extra money off their mortgage due to the reductions in the base rate; whilst 24% of borrowers were choosing to disregard the recession and spend their surplus money on clothing and holidays. The Co-operative bank said it appeared that customers were recognising the benefits of making overpayment in light of the historical low interest rates being paid to savers at present.

Flexible Mortgages are the Future
Some mortgage lenders will not allow overpayments, while other lenders would allow a maximum of five or ten percent overpayment each year. Other lenders like the Co-operative bank and the Northern Rock will allow their borrowers to overpay larger amounts off their mortgage balances each year. In the case of the Northern Rock they will allow the borrower to overpay the whole amount to within 1 of paying off their mortgage without incurring any penalties for making large overpayments. These types of mortgage accounts are called ‘flexible mortgages’ as they allow the borrower to overpay, underpay and borrow back the overpayments already made. Flexible mortgages put the borrower in control of their mortgages.

It makes financial sense!
It makes real financial sense for mortgage borrowers to make even small monthly overpayments, as these overpayments can add up to a large difference over the lifetime of the mortgage. By making an overpayment you will reduce the amount of the mortgage outstanding and if you continue to over pay you will also reduce the term of the mortgage. By reducing the term of the mortgage you will save enormous amount of money in interest payments that you would have otherwise paid if you had not made any overpayments.

Better Interest rate than a Savings account
Many people are overpaying their mortgages due to the low returns received from their savings accounts and the higher costs of their mortgages. If you are committed to a mortgage with an interest rate of say 5% and your savings account is offering you 1%; then it is advisable to overpaying your mortgage debt that has the higher interest cost. The sooner you can pay off a higher interest rate debt the cheaper the debt becomes and the more money you will have saved.

Tax efficiency
By far the best reason for paying off your mortgage rather than saving the money in a savings account is that you will not pay any tax on the money you pay off on your mortgage. Where as the money you earn on your savings account is taxable at 20% at source by Inland Revenue and if you are a higher tax payer than it will cost you a further 20%. So for a higher rate tax payer the benefits of overpaying your mortgage are substantial more cost effective and it is just as cost effective for lower rate tax payers.

It’s not in your Banks Interest for you to overpay your mortgage
It’s not in a banks interest to see its borrowers overpaying their mortgages. Banks make money from the interest you pay them each month. So they do not want you to pay your mortgage off any quicker as they will lose money. This is possibly one of the main reasons that many mortgage lenders have limits on the amount of overpayments they will allow. Don’t ever believe your bank cares about you they only care about satisfying the needs of their shareholders. The longer the duration of your mortgage the more interest you will pay the bank; for example a twenty five year mortgage will earn the bank more money than a twenty year mortgage.

Early Mortgage Payoff Using No Extra Payments!

Author: Mark Aucamp

Contributing author Mark Aucamp has been providing Talk Money Blog with regular Money Saving Advice advice and comments. Mark has extensive experience in providing Debt Management, Quick Mortgage Advice and solutions. He is recognised as an authority in the field of debt management and mortgage advice. Find out how to clear your credit card debts legally!

Article Source: http://EzineArticles.com/?expert=Mark_Aucamp



Mortgage Payoff: Lump Sum or Monthly?
Thus we put 5% down on the house and got a 15% second mortgage to cover the balance from 80% on up. We can easily afford the payments and have actually been paying about a month early — a great layer of protection if we need it.

Early Mortgage Payoff Calculator
Did you know that the amount of interest paid on a 30 year mortgage would be close to the amount of money you borrowed now? I used this calculator to obtain my numbers. Put an Early Mortgage Payoff Calculator on your site!

Refinance To Enable Early Mortgage Payoff
Paying off your mortgage early can save you money, especially when you refinance to a mortgage loan with a shorter duration and lower interest rate. Many homeowners dream of an early mortgage payoff. What’s the best way to find a good [...]

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Mar 11

I have been a mortgage broker for over 10 years in South Florida. Over the years, many mortgage acceleration programs have crossed my path, but I have never felt truly passionate about one of these programs until I was introduced to the Money Merge Account from United First Financial. The purpose of this article is to outline the benefits and put to rest the misconceptions about these innovative programs and why I truly believe the Money Merge Account is the best of them.

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To start with, we first must understand what exactly is meant by the term ‘mortgage acceleration program’ and what every one of these program does and does not do.

Mortgage acceleration programs are designed to ‘help’ or ‘assist’ in paying down your mortgage’s principal balance and save on the total amount of interest you pay on your mortgage. If you borrowed $200,000, then you will be paying back the $200,000, just the amount of interest you pay will be reduced. I usually refer to these programs as the ‘diet programs of the financial world’. The reason for this analogy is, just like diet programs, every person is capable of losing weight although some of us need help in achieving this goal. The same can be said about our mortgage. We are all capable in paying off our mortgage faster, but some of us lack the financial obedience and discipline to do so. Mortgage acceleration programs keep us on the path toward our ultimate goal (living mortgage free) and making this task easier and less stressful for us; that is all.

With that being said, I would like to look at the two different types of mortgage acceleration programs available today and the pros and cons of each.

The first type of program is the first position Home Equity Line of Credit or HELOC for short. In this program, a client is asked to refinance their existing first mortgage (which is usually a fixed rate, fully amortized loan), their second mortgage (if they have one) and their credit card debt (if they have any) into a first position HELOC. The reason for this is the payment on a HELOC is interest only, BUT the amount of interest we are charged is based on the daily average balance of the HELOC for the prior month. The client is then asked to transfer the full amount of their paychecks (and whatever other money they make that month) into the HELOC (they should always have a $0 balance in their checking/savings accounts). By doing this, it drives down the principal balance of the HELOC. When they need to pay a bill, they simply can write a check from their HELOC to pay it since all HELOCs act as a checking account as well. In essence, the HELOC becomes the client’s checking and savings account.

To put this into prospective, let’s look at an example:

A person starts the first of the month with a balance on the HELOC at $100,000. They are paid twice a month on the 1st and the 15th in the amount of $2,500 each pay period and they have monthly living expenses of $4,000 (to make this example simple, we will assume the client pays all their bills on the 30th of the month). Therefore, they started the month with a $100,000 HELOC balance, but their paychecks were applied throughout the month and then their expenses were written from the HELOC, therefore, their end of the month balance is $99,000 (($100,000 - $2,500 - $2,500) + $4,000). If the interest rate on the HELOC was 10%, people would assume that their payment would be $825 at the end of the month (($99,000 * 10%) / 12 = $825). But this is wrong. There true payment would be based on the average daily balance of the account, which is $93,083.33 ($97,500 for the first 14 days, $95,000 for the next 15 days and $99,000 for 1 day divided by 30 days). Therefore, their payment on the HELOC would be $755.69. This is a difference of $49.31.

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Based on the information above, lets look at the pros and cons to this program.

The pros to this program should be easy to identify:

  • 1) Every dollar earned and saved is used to help pay down the principal on the HELOC.

  • 2) No extra steps are needed to be taken by the client, just transfer their money from checking/savings into the HELOC.

  • 3) Access to the HELOC is always available to pay expenses.

    • The first position HELOC is a very simple and effective way for people to use every dollar they earn and save to help pay down the principal balance and save on they amount of interest they pay on their mortgage. However, there are a number of cons with this program which has prevented me from offering this solution to clients. They are as follows:

  • 1) They client never truly knows how many years are left until their mortgage is paid off because a tracking system has not been developed.
  • 2) The interest rate on the HELOC is adjustable and tied to the Prime Rate which is controlledby the Federal Reserve. The Federal Reserve has increased the Prime Rate from 4.00% in July 2003 to 8.25% in July 2007. As the rate of the Prime Rate increases, the length of time to payoff the client’s mortgage also increases as well as their payment.
  • 3) There is always the ‘drunken sailor effect’ (this is what I call it) to consider as well. This basically suggests that since the client always has full access to the HELOC, they can borrow from the HELOC and drive the principal balance up to its original amount. People who have access to money tend to spend it if it is not watched closely.
  • 4) Lenders who offer this program typically charge high fees.

    • The second type of mortgage acceleration program combines the use of a second position HELOC and computer software to payoff the first mortgage and other debts (this is how the Money Merge Account is setup). In this program, a client obtains a HELOC as a second mortgage on their property. The client is then asked to transfer the full amount of their paychecks (and whatever other money they make that month) into the HELOC (they should always have a $0 balance in their checking/savings accounts). By doing this, it drives down the principal balance of the HELOC. When they need to pay a bill, they simply can write a check from their HELOC to pay it since all HELOCs act as a checking account as well. In essence, the HELOC becomes the client’s checking and savings account.

    Computer software is then used to monitor how much money is coming in, the frequency in which the client is paid and how much is going out for expenses. Based on these factors, the computer software will tell the client exactly how much (an exact dollar amount down to the penny) and when (an exact date) to borrow from the HELOC and apply it as an additional principal payment to their first mortgage. The computer software will also keep track of how much principal is owed on the first mortgage and HELOC and how much time is left to payoff the mortgages.

    Now that we have an overview of how the program works, let’s look at the pros and cons to this program.

    There are a number of pros to this system which make it very useful to a client. They are:

  • 1) The client does not have to refinance their existing first mortgage (which is usually a fixed rate).
  • 2) The HELOC can be obtained at their local bank and the bank does not charge fees (check with your bank to be sure) to obtain the HELOC.
  • 3) A much smaller HELOC is used.
  • 4) The interest rate on the HELOC does not matter as long as the client does not have an existing HELOC with a balance. If the HELOC is new and doesn’t have a balance, the client will payoff their mortgage(s) in the same amount of time regardless of the interest rate.
  • 5) The computer software acts as a ‘financial dashboard’ clearly showing the client their income, expenses, what they owe on the mortgages and when everything will be paid off.
  • 6) The client has to manually input their expenses into the computer software, thus subconsciously making them realize how much money they are truly spending (helps prevent the ‘drunken sailor effect’ from happening).
  • 7) The client can clearly see the amount of time added to the payoff of their mortgage with every expense. This is referred to as the True Value of Money. Although some expenses are necessary (food, gas, electric, etc…) many are discretionary and can be cut back on (going out to dinner is a big one). This subconsciously makes the client become more frugal with their money and spend less on unnecessary expenses.
  • 8) Every dollar earned and saved is used to payoff the mortgage(s).
  • 9) Less expensive then the first position HELOC.
  • 10) WILL ALWAYS PAYOFF FASTER THEN THE FIRST POSITION HELOC.
  • 11) The results are Guaranteed.

    • Although the pro list is long, there are some cons to this program:

  • 1) The client has to manually input their expenses into the computer software; therefore, there is the chance they will not.
  • 2) The program does not move the client’s money for them. Additional principal payments to the first mortgage from the HELOC have to made by the client.

  • 3) Clients living in states which will not allow HELOCs (Texas is one of them) are not able to utilize this program.

    • In this article we examined the two different types of mortgage acceleration programs and listed the pros and cons of each of them. You can clearly see why I have chosen to offer the Money Merge Account to my clients over the first position HELOC. I truly believe this program will help those clients who need assistance in controlling their finances to become mortgage free. At the time of this article, I currently have several clients utilizing the Money Merge Account and all are happy and referring other potential clients to me. It should also be noted that there is not one unhappy client out of the many thousands across the United States who are currently using the Money Merge Account.

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    Author: Charles Petruzzi

    Charles Petruzzi has been a mortgage broker in South Florida since 1996 and is a agent for United First Financial and the Money Merge Account. For more information on the Money Merge Account, please visit his website at http://www.mortgageaccelerationllc.com

    Article Source: http://EzineArticles.com/?expert=Charles_Petruzzi


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    Mar 9


    6 Ways To Invest In Real Estate

    If you’re interested in real estate investing, take a look at these 6 different and decide which one is right for you

    The first question I have for someone who’s interested in real estate investing is: What type of investing is right for you?

    Now when I ask people this question, the response I often hear is:

    "I didn’t know there were different types of real estate investments. I just want to make some money."

    Well, there are several ways to invest in real estate.

    Let me explain.

    Payoff Your Home Loan In Ten Years!

    1. Make Money Monthly (Cash Flow)

    You buy property and become a landlord. This doesn’t necessarily mean you deal with tenants. There are plenty of management companies that will do that for a nominal fee.

    You buy property and structure the deal so that any mortgage payment, plus the sum total of expenses, are less than the amount of income (rent) you are receiving. Hence the term - Positive Cash Flow!

    When calculating positive cash flow, don’t forget there are annual tax benefits to owning real estate and appreciation (realized at the time of sale.)

    2. Buying and Selling (Flipping)

    The idea here is simple: buy property for less than you sell it for. You can buy a distressed property that needs improvement, or buy from a distressed owner that needs out.

    When you buy property that needs improvement, to make the most money you will want to bring the property up to snuff. Whether you do the work, or hire it done, you will need to calculate your cost to improve the property, as well as your holding costs. Holding costs are the expenses of owning the property during the time of repairs and until the property is sold. These costs include taxes, any mortgage interest payments, utilities, and normal maintenance such as grass cutting, and snow removal.

    When you buy property from a distressed owner, often the property is fine, but the owner has either fallen behind in mortgage payments or taxes, or does not want the property for other reasons such as relocation, divorce, probate, etc. In this situation, you payoff the owner’s debt, take over the property, and sell for a profit. Obviously the debt needs to be lower than the market value for you to profit.

    3. Lease Option

    This less common method involves controlling the property without taking title. You lease the property and either sell the property or lease to another tenant until the property sells. This one is a bit more complicated and has some drawbacks, such as the inability to depreciate your lease, but you can reap big profits.

    4. Buying Tax Liens

    Property in default for back taxes can be purchased from the government. You simply place a deposit as designated by the government and sit out the waiting period. If the taxes are not paid, you get the property. Oh, in the meantime your money earns interest and you are guaranteed by the government not to lose a dime!

    5. Private Lending

    Individuals are allowed to finance so many properties per year without the regulations of becoming a mortgage company. This is a great way to invest passively in the real estate market. By holding a first deed of trust, your money is secured by the property, and you can charge more interest than you would otherwise earn with a typical safe passive investment such as CDs.

    6. Pre-Construction:

    Buy property direct from builders before they are built. You lock in a wholesale price and market the property upon completion. This is a good opportunity in many areas. You have no tenants to worry about and no mortgage payments during the construction.

    So there are six choices for you to start making money in real estate!

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    Learn more about investing real estate now at: http://www.iloverealestateinvesting.com

    By yulin peng


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    Mar 8

    Mortgage Elimination Today

    Payoff your home loan in a third of the time with no extra payments
    Find Out More Click Here…

    With the credit crunch, dropping dollar values, skyrocketing costs,and gloomy outlook, Is it still a good time to be looking for ways to get out of debt? Should you consider a mortgage acceleration program? The answers may not be what you think.

    Becoming debt free in America today is a popular theme. The problem, of course, is the methodology. What really works? What is the safest and fastest way to debt freedom? Removing your monthly mortgage payment forever might be a good place to start.

    If you are a typical American homeowner, then you have probably bought or refinanced a home in the last 5-7 years. That means that you are putting out a large wad of your cash each month to pay the interest on your mortgage. If you hadn’t noticed, most of your mortgage payment is going out to the lender in the form of interest. That’s their profit for issuing you a loan. Hey, everybody’s got to make a buck, right?

    Banks are banks and you can love then or hate them. But face it; if it weren’t for the bank, then you would probably not be making payments on your own home. You would be paying rent. So count your blessings for that interest payment and be thankful to your lender. But understand this…just because you are stuck with a mortgage, does NOT mean that you have to pay every bit of that interest. And make no mistake, that interest is stealing your retirement. Now you can get it back.

    I’m not saying that your lender will give you an interest refund. No they won’t. Once you pay it to them, it is theirs. Done deal. The big idea is to eliminate as much interest as possible from the equation. If you don’t pay it, they don’t keep it. But how? The answer lies in your principle. When you pay off your principle balance faster, the lender has less principle balance to charge you interest on. Make sense? They can only charge you interest on the current amount that you have borrowed. When that amount goes down, so does the amount of interest you will pay.

    The sticky part is, naturally, how to pay off more principle faster. Well, there are several ways to do that. And friends, you will do yourself a big favor when you start to do them. Be of good cheer, because there are plenty of time-tested and true methods for principle reduction, and a crop of companies and products out there that want to show you the way.

    You have probably heard them on the radio, seen them on TV, or read them in the paper. Stop being passive and check them out. Some are just debt consolidation plans or debt roll down plans. Those are nothing more than short term band aids. Some are fancy new loan packages with an accelerator built in. These can be great for you, and can cut down your mortgage term significantly, but the closing costs and administrative fees might be a problem.

    If you’ve done any research into paying off your mortgage, you will inevitably come across the big boys in mortgage elimination. We’re talking United First Financial, Sydney Financial Group, Macquarie, and CMG to name a few. Don’t be intimidated by the sheer volume of advertisers and agents. And don’t allow yourself to be distracted by the naysayers and scam alarmists. These are solid companies with proven track records. They really work, so take the time to check them out. It will be time well spent, when you see how you can pay off your house in a fraction of the time and save a fortune in interest. These folks will help you get your retirement back!

    I suggest going online to the Better Business Bureau and looking for unresolved issues. Then get in contact with a representative to find out how they can benefit your family. Nothing makes it as real as seeing your own numbers. I also like to send people to G Edward Griffin’s website. He is a brilliant financial analyst and watchdog. Go see what he says about all this. Also, ask the representatives from these companies to demonstrate how their products work. Find out about guarantees, customer service, corporate experience, stability, and track records. Inquire about their customer satisfaction and product retention rates.

    Once you have done a little leg work, you are going to want to find out if you even qualify for a mortgage acceleration product. The agents that you work with should be able to tell you after a quick analysis of your situation. The more advanced methods will include the use of a Line Of Credit. Don’t be scared. You are going to need one, and it can become a wonderful tool and financial friend.

    The problem these days may be getting you into a line of credit. The Home Equity Line of Credit, or HELOC for short, is getting increasingly rare these days due to dropping home values and the credit crunch. You may need to look at a Personal Line of Credit or a Business Line of Credit. Your agent should be able to help you. And one of these companies may be able to show you how almost anybody can use credit card as the line of credit. Making the mortgage accelerator available to nearly anyone!

    My bottom line advice is timeless. Get out of debt and build some wealth to leave for your grandkids and your children. You won’t really be able to do that until you pay off your house. This is do-able people. Get out there and find the right product for you, and get yourself in position to be debt free.You may discover the best investment opportunity of your life.

    Our Recommended Mortgage Elimination System

    By: Marc Rosenbaum

    Marc Rosenbaum wants YOU out of debt. Find out the best ways to get debt-free and how to help others do the same. www.reallyownahome.com call 970 562 4777

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