Mortgage Cycling Secrets Revealed

Mortgage Cycling Secrets Revealed

Mortgage Cycling Secrets Revealed
Have you​ heard about mortgage cycling? Maybe you've seen the​ ads for books on​ this secret technique for paying off your mortgage sooner .​
is​ there some useful information in​ them? Yes,​ especially if​ you​ are not familiar with the​ basic premise that you​ can pay extra principle every year and you'll pay off the​ loan sooner and save thousands on​ interest.
Mortgage cycling is​ dressed up as​ a​ new system,​ and of​ course there are many little tricks to​ doing this most effectively .​
There are more risky techniques too,​ like using short-term home-equity loans to​ pay down your primary mortgage now .​
This latter technique could cost you​ more in​ interest or​ even put you​ into financial trouble that leads towards foreclosure.
The safest way of​ mortgage cycling is​ to​ just put large lump sums of​ money towards your mortgage loan every few months to​ a​ year .​
Pay thousands of​ dollars extra per year,​ and you​ will pay off your loan many years sooner .​
No surprise there,​ right,​ but what if​ you​ don't have the​ hundreds of​ dollars a​ month extra needed to​ do this?
Money For Mortgage Cycling
Don't assume you​ can't come up with SOME extra money,​ at​ least each year .​
Some will say they can't,​ and yet still add hundreds of​ dollars per month to​ credit card payments from buying anything from expensive shoes to​ snowmobiles .​
There's nothing wrong with buying these things,​ but the​ choice is​ yours if​ you​ want to​ pay down that mortgage instead.
You can also pay off large chunks of​ principle by using your annual tax refund,​ insurance settlements that are not otherwise allocated,​ and any cash gifts or​ prizes you​ may receive.
How much sooner you​ can pay off your mortgage depends on​ how much extra you​ pay and when .​
The sooner you​ pay extra money towards the​ principle,​ the​ better .​
Let's demonstrate with a​ simple example,​ just making an​ extra payment each month.
Suppose you​ have a​ $160,​000 30-year mortgage at​ a​ 7% annual interest rate .​
Regular monthly payments would be $1064.40 .​
If you​ looked at​ your second payment you​ would see that it's composed of​ $932.57 interest and $131.83 principle (the amount you​ actually pay down the​ loan) .​
Just add $131.83 to​ your normal payment of​ $1064.40,​ and you​ have taken an​ entire month off the​ time it​ will take to​ pay off your mortgage .​
If you​ did this each month,​ you​ would cut the​ time to​ pay off your loan in​ half .​
The principle part of​ the​ payment would be growing with each payment,​ so the​ extra payment would be a​ little more each month (around $137 by the​ end of​ the​ first year),​ but hopefully over the​ years your income will rise enough to​ afford that .​
Consider that if​ you​ pay normally,​ your last year of​ the​ mortgage you'll pay $12,​772.80 ($1064.40 x 12 months) .​
On the​ other hand,​ pay about an​ extra $1600 that first year,​ in​ the​ way shown above,​ and you'll eliminate that entire last year - a​ savings of​ over $11,​000!
Other ways to​ pay off extra principle need to​ be evaluated carefully .​
You could,​ for example,​ put a​ few thousand of​ your savings towards the​ loan now and save perhaps tens of​ thousands in​ interest over the​ years .​
However,​ will you​ then need to​ pay even higher credit card rates because you​ emptied your savings account and need some money? you​ could cash in​ stocks and apply the​ money to​ the​ loan,​ but will you​ be giving up a​ 9% return to​ pay down a​ 7% mortgage? you​ may also want to​ consider paying off any debts with higher interest rates before you​ apply extra money to​ your mortgage.
To keep it​ simple,​ set aside extra money every month and apply it​ to​ the​ loan .​
Then use any other money that may otherwise be squandered (like tax refunds) .​
If you​ just do a​ few simple things to​ pay something extra on​ the​ loan each year,​ and you​ can forget about complicated mortgage cycling plans.

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