By Brent Muller

You may have heard of certain programs that promise to help you pay off your home mortgage debt much faster. The first thing you should do when considering one of these programs is talk to your financial advisor. Just because you CAN pay off your mortgage faster, does not mean it’s the right strategy for everyone.

Home equity acceleration programs are not very complicated and are based on the theory of always using all of your money to pay down maximum debt at all times. There are two main programs in existence which offer alternative strategies for paying off your mortgage quickly. Both claim to pay off your mortgage years faster without changing your spending habits. Both programs set up your mortgage or second mortgage to function like a savings/checking account. You then deposit all paychecks into this account to pay down the mortgage balance and use this account to pay your bills.

The first is a mortgage acceleration plan that requires the client to refinance their entire mortgage into a first position HELOC. You are forced to refinance your 30-year fixed rate mortgage into a HELOC that floats monthly, typically at a higher interest rate. Your mortgage then becomes a hybrid of a home mortgage and a checking account. This option is very expensive since it requires a full refinance of your home including all closing costs. Often, the client also pays a rate buy down fee of up to three percent of the loan amount.

The second program works on the same principle but does not require you to refinance your fixed rate 1st mortgage into a variable rate HELOC. This plan has you set up a 2nd position HELOC and pay all available funds to this account. When the balance is zero, you are instructed to make a principle payment to your 1st mortgage. This plan requires the purchase of a software program and has a charge of $3500. This is in addition to the cost of opening the HELOC. You should also know that the company that charges clients $3,500 is a hybrid Multi-Level Marketing (MLM) plan. Although this plan does not require you to put your whole mortgage into a variable rate loan, it is still excessively expensive. For $3500, you are purchasing software that tells you how much interest you are saving each month. The software is really just a way to justify charging $3500 for the program.

If paying off your mortgage early is a priority, you can achieve the same result with very little expense. If you have questions about how to do this, please call Wealth Enhancement Mortgage Services, LLC.

For more information, please call Brent Muller or email Wealth Enhancement Mortgage Services.

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