Mortgage Payoff question

General Questions
#1

Hi,

I am new to this forum and have a question about mortgage schemes/scams? Sorry if this has already been asked, but I searched and didn’t see anything related. I have a friend who has recommended this company’s software/book/subscription called Speed Equity to pay off your mortgage early. She explained briefly how it works, but it really sounds like a scam. It basically just sounds like you shuffle money around from a home equity loan to pay off your mortgage. Does this really pay off your mortgage any faster than just making regular extra payments every month on your own? Thanks

#2

Any legitimate advice on paying off your mortgage faster can be had for free.
No need to buy someones book/software/etc.
And you’re right, what it typically amounts to is making one additional monthly payment a year by taking your monthly mortgage payment, cutting it in half, and paying that every two weeks. So by the end of the year you have made 26 half payments instead of 12 full payments.
The software is probably just some calendar payment schedule.

#3

You can use this spreadsheet: http://www.edisonmortgage.net/files/9_xtrapmts.xls
to play around with extra payments and see how fast you can pay off a loan. It’s amazing to see how much a single extra payment early in the life of the loan cuts the total paid.

#4

Here is one person’s take on Speed Equity. There are two angles, one is accelerating payments. The other, which apparently doesn’t help much, is put *all *your money into paying your mortgage, then take out a home equity line to pay all your expenses. I’m not really sure how that helps; I would think the interest rate on a HELOC would be higher than a first mortgage, but then again, the HELOC principal would just be a fraction of the mortgage. I am not a financial pro but this method seems like more trouble and risk than it’s worth. You can find all sorts of stuff about this method by Googling things like “speed equity pay mortgage.”

http://caveatemptorblog.com/2007/08/15/the-speed-equity-system-is-not-all-it-seems/

Go with just making an extra payment when you can.

#5

As I understand my mortgage, and this may not apply to others, after I cover each month’s payment, I can specify that any additional I pay should be applied directly to the principal. Since with mine, like with most mortgages, the total interest paid over the life of the loan is way more than the principal, paying off principal faster and thereby shortening the term of the loan will always help save you money in the long run.