Pay Your Mortgage Off Sooner!

Pay Down Your Mortgage Faster

As a high-volume mortgage agent that manages a team of approx. 12 certified mortgage consultants, we've been naturally conditioned to scour local business markets in search of potential mortgage prospects and designate the "ideal" mortgage with the appropriate terms and conditions; essentially we give you debt! Unfortunately, (like many industries) there looms a faction of "money-hungry" individuals whom prey on the mis-informed, the ignorant, the oblivious, and especially the desparate. These "desparate" home-owners or home-buyers flail through the cracks of the financial matrix like a "wounded-duck" until they pool into the waiting arms of a "hollow-hearted" mortgage broker in the sub-prime market. I use the term "hollow-hearted" mercilessly because Ive seen first-hand the "evils" that genuinely "good" and unsuspecting people avail themselves to when faced with a little duress. You'd be surprised at what people will sign with a "shamelessly motivated" mortgage representative leaning-in from across the table. Unfortunately, these so-called "financial experts" give the industry a bad name. That being said, there are a handful of solid mortgage consultants that strive to preserve or enhance a customer's particular lifestyle. I happen to subscribe to the "latter" when it comes to servicing my clients. My overall approach is to "un-mortgage" or significantly reduce the amount that is paid towards the "interest" portion of their home loan, so they are able to live debt-free far sooner than anticipated. On that note, please allow me to offer you some helpful hints in realization of this goal:

Ways to significantly PAY down your mortgage:

1. Maintain a high beacon or credit score. The higher the beacon or credit score the less risk you pose to a prospective lender. Consequentially, the lower a person's credit rating the less mortgaging options become available. A person should avoid applying for TOO much credit and should regulary make payments to the credit products that they already have. Also, maintaining high balances or being "over" the credit limit will negatively impact your credit score. Lastly, avoid too many credit pulls or inquiries made to your credit bureau. Unfortunately, banks regard those with multiple or continuous "hits" to their credit bureau as problematic and immediately categorize them as "credit-seekers" (which may or may not be true). The point here is to ONLY allow people that have a high degree of product knowledge and industry experience to run credit checks on you, because they may be impacting your credit rating.

2. Avoid 2nd & 3rd mortgage products. Companies that lend 2nd and 3rd mortgages aren't in the business to lose money; trust me! These aggressive "loan-shark" style lenders normally charge higher interest rates (upwards of between 10-18%), impose higher fees (ie. set-up fees, missed payment fees, renewal fees, discharge fees, legal fees, retainers, etc) Private lenders have also earned a reputation of being rather inflexible and litigious when dealing with missed or "choppy" payments. I've personally witnessed some of these lenders move to foreclosure after only ONE bounced payment while a family innocently vacationed. Irresponsible home-owner or "heartless" lender; it's difficult to say. Although, for some people a 2nd mortgage may be a viable or necessary solution to their credit woes, (where possible) they should be avoided at all costs. DO NOT GET BULLIED INTO TAKING A 2ND MORTGAGE EVER! Always get a second opinion from an accredited mortgage specialist.

3. Choose shorter amortizations + accelerated payment options. Opting to go with a shorter amortization period or switching to an accelerated payment schedule will undoubtedly knock years off of your mortgage. This is made possible by mitigating the effects of compounding interest with shorter much "larger" mortgage payments. Some mortgage specialists will advise "stretching" out the amortization period thereby reducing a mortgagor's total monthly payments. In doing this, the applicant is better suited to qualify for a paticular mortgage product on the basis of affordability. If you do (in fact) select this particular option, you should place a request to reduce the amortization once you've either recieved a pay raise, signifcantly reduced your month-to-month debt load, or made a sizeable payment contribution to your mortgage. By simply doing this alone, you could literally save tens of thousands of dollars over the life of your mortgage. Further to this, in selecting an accelerated bi-weekly or weekly payment option, more money is automatically applied to your principle, thereby reducing the amount of interest compounded to your mortgage balance. In addition to this, there are two extra payments throughout the course of a calandar year that also get applied to the principle balance.

4. Carefully examine the prepayment privileges of every mortgage product. Many mortgage companies impose harsh restrictions on additional or lump-sum payments being made towards the principle. It's not uncommon for homeowner's to incur some form of monetary penalty for exceeding an allowable limit to put down on their respective mortgage. Typically, the limit can range anywhere from 5 to 20% down per calandar year to avoid any such penalty. Of course, this doesn't apply to OPEN mortgages or home-equity lines of credit. That being said, it will still likely by in a person's best interest to pay the (smaller by comparison) penalty to avoid paying a higher balance at a given rate of interest. Further to this, one should consult a mortgage professional to determine the financial viability of such a weighty decision. However, I firmly believe that (where ever reasonably possible) a person should apply surplus cash or savings to their principle balance.

5. Avoid Interest-Only or Home-Equity Lines of Credit (HELOC). Although these products serve a specific niche, interest-only or HELOC's usually bear higher rates of interest in exchange for the flexibility of lower month-to-month payments or continued access to the home's equity. Trust me, lenders just love it when customers just remit solely the interest portion or minimum required payment; it simply means that the principle balance will remain stagnant until a principle payment is made. In other words, a mortgagor may end up extending the amortization by several years or even decades depending on how many payments were applied to the principle. In my opinion, one of the only circumstances whereby a HELOC-style mortgage may be advantageous to a customer's financial bottom-line, comes when a person wishes to pay down there mortgage balance with frequent lump-sums or higher random payments. ***I sincerely question those mortgage specialists or bankers that entice debt-ridden customers to consolidate outstanding debts with the available credit on their home loans without CLOSING their higher interest bearing credit products. This may result in the customer "spinning their wheels" in debt and ultimately prove to be a "dis-service" to the NEEDS of their customer; especially if they lack discipline in cash-flow management.

6. Avoid standard bank issued insurance products. Although it is standard practice to offer "mortgage" insurance to qualified homebuyers, many of these insurance products aren't quite the "shinning" deal that they seem to be. When it comes to "mortgage" insurance (as is often the case) the BIG print "giveth" and the SMALL print "taketh". In some cases a policy holdeer may have paid the same monthly premium for years and years, only to have an unfortunate and unforseen circumstance occur and ONLY receive a settlement for the mortgage balance at the time of claim. For example, if you had a $400K mortgage and paid your mortgage + insurance premium for the better part of 20 years and your balance at the time of claim is ONLY $5K; you would ONLY receive a pay-out of $5K. There are other "smarter" options available. I seem favour the "term" life insurance that can be assigned by licensed insurance representative. This particular "style" of insurance accumulates your monthly premiums and "pays" them back to you at the end of the agreed upon term. Now, this option is normally a little costlier but the coverage ALWAYS remains at a fixed amount and the premiums never fluctuate. I personally like this option because at the end of the term, you can dump the cash onto your principle balance and effectively reduce or pay-off your existing mortgage. I encourage you to contact a certified life insurance sales representative and explore the "many" options that are currently available to you.

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