Taylor-Brown Real Estate Talks

Posted By admin on December 2, 2008

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Last time, we discuss the basis of your mortgage.  We discovered what a mortgage is.  We found out that the mortgage is a closed end loan.  A closed end loan had characteristics that were not conductive to us paying off the mortgage in a short period of time.  In essence, without our mortgages we will become one step closer to becoming financial free.

                So today, we are going to discuss how we will become financial free of our mortgage.  We will discuss how to pay your mortgage off in as little as 11.5 years for a 30 year mortgage or 5.5 years for a 15 year mortgage without refinancing your present mortgage.

                Let’s get started.  First, we must understand the conventional banking way of paying off your mortgage in the time frame above.  In conventional banking, you must refinance to a lower interest rate and/or terms or pay more toward your principal to reduce the length of time on paying the mortgage and consequently reducing the interest paid to the lender. 

                It should be easy to see that in order to reduce the choke hold that the lender has on us with our mortgage we must cancel the interest we are paying the lender.  But before we discuss how we will accomplish the cancellation of interest, we must discuss a key component in accomplishing our goal of interest cancellation.

                This component is the advance line of credit or home equity line of credit.  Why the advanced line of credit?  Well, with the advance line of credit, the lender must apply your payment to the loan balance on the day received.  Remember, with our mortgage, the closed end loan, the payment is applied, but it does not effect the mortgage in the month or day received, but it effects the following months principal balance and calculated interest.

                If there is a payment several times a month on the open end loan the lender will have to recalculate interest several times in the month. Consequently, the interest can be reduced daily (if we send in a payment daily) or several times a month at the most depending on frequency of payments.  This in turn forces the lender to recalculate interest and subsequently canceling interest charged on the mortgage.  Incidentally, this loan uses daily interest cancellation on the new principal balance once the payment is applied.

                This type of account has another advantage you can take money out and put money in.  This feature is similar to your checking account.  With that being said we are going to examine using the advanced line of credit as a checking account.  We will examine applying our income to the advanced line of credit and paying our bills from the account.  When we apply our income to the advanced line of credit, we are making a payment on the advanced line of credit.  When we pay our bills from the advanced line of credit we are withdrawing from the account.

                Why have we examined the mortgage and the advanced line of credit?  How does examining these different types of loan products help you cancel interest on your mortgage?  These products alone will not eliminate interest, but if they are coupled with the money merge account software and website; interest will be reduced at a rapid rate. 

                Let’s put the money merge account to work to see how it will eliminate the interest on our mortgage.

• We will need to deposit the maximum amount of money into the advanced line credit account per month.
• Next, we want to allow the money to stay in the amount as long as possible.
• Lastly, we want to take out or spend the less amount of money or credit from this account each month.

Now let’s examine a model monthly budget.  Remember, we will not change what we spend our money on, but how we spend it.  First, we must have the after taxes monthly amount.  For our example, the after taxes amount is $3000.00.  The monthly living expenses are $1,750 with $1,250 left in discretionary income.

                Next, you will to get the advanced line of credit, as long as you get a $10,000 line of credit you will be able to pay your mortgage quicker than with your type mortgage payment. 

                In this example, we do indeed have a $10,000 line of credit. 

                In month 1 with the money merge account.  There is one time fee for the software of $3500.00.  This can come out of the line of credit.  Now, there is a remaining line of credit of $6500.  Now, the living expenses will be paid from the money merge account.  The living expenses were $1750.  This makes the line of credit have an average daily balance of -$5250.  This is how the interest cancellation comes into it.  -$5250 has $3000 income applied to it making the daily balance $2250.  The charges on the $2250 at 10% interest rate are $22.50, but we make a payment of $3000 on the account.  In essence paying more than what the bank was looking for.  The interest is on the daily amount.

                Stay tune to the next blog where we pull this all together….

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Categories: mortgages
Tags: mortgages