Franklin Financial Group Blog

It is a well know fact that the mortgage industry is experiencing great turmoil. Many people are finding it difficult or impossible to get a program that offers a lower interest rate than they currently have, or one that enables them to reduce their minimum monthly payments, in order to create an excess to pay down their loans, and thus build equity at a faster rate. Imagine if you were on track to have a 30-year mortgage paid off in under 10 years, without paying out more than you currently are per month. What a safe feeling you would have, regardless of what is going on in the mortgage and real estate realms!  There are software products available to many consumers that often work with a homeowner's Home Equity Line of Credit (HELOC) to pay off a first mortgage at a much faster pace.  This is accomplished by making larger payments against a first mortgage balance using available funds from the HELOC.  As the HELOC funds are applied to lower the principle balance on the first mortgage, the interest that accrues on the amortized first mortgage is reduced. Mortgages have their interest accruing from the date the last payment on the account was received, so they are essentially paid in arrears each month. Knocking the balance down at a much faster rate therefore contributes to less interest being required on the remaining balance.

The question you may ask is that if you are using the HELOC to pay down your mortgage and thus reduce the balance on that loan, how do you ever pay down the increasing balance on the line of credit?  In order for this to work you must deposit (or pay in) income on or against the credit line, as you receive it. Many households have dual incomes paid every other week. With this in mind, payments are being made to pay down the credit line sometimes every week, or more often every other week. It is like you are using the HELOC like a personal checking account. A credit line is an open-ended account that has interest calculated daily on the balance. If a household income is reducing the balance every week, or every other week, the credit line does not have the time to accrue as much interest month to month. The software products mentioned use the household income input by the homeowners, and the mortgage balance and terms (along with other possible debts) to be paid off at a faster rate. The software guides the homeowners when to make the payments for the mortgage and debts to be paid off, and in what amounts. When the balance on the HELOC is reduced to a certain amount, the software signals the user to make a larger payment against the mortgage and/or other debts to be paid. The monthly income pays down the HELOC balance over time until another larger payment is cued to be made.

The software programs mentioned above have been around for many years and they work! The key is to enter the information accurately for each person's situation, and then follow the software's instructions. They require an initial investment for up to $3,500 or more, and also require time and attention to be paid to one's monthly finances. With the return often being in the tens to hundreds of thousands of dollars of interest saved, they are definitely worth every penny! Keep in mind, the initial investment can be paid using the HELOC, with the software figuring this amount to be included in the calculations as a debt to be paid off. So it is possible to accomplish the entire program goal without actually paying out any initial money straight from your cash at hand. Obviously if you can afford to pay the initial cost up front rather than financing it, you will save additional money in interest. Either way, this can be a far less expensive way to become debt free than if you try to refinance a home and attempt to do this on your own.

Feel free to contact me should like additional information on how to become mortgage free in less than half the time. You may contact me at kary@franklinfinancialgroup.com .

Merry Christmas and Happy New Year!