Mortgage Cycle of Debt: How to Set Your Self Free
Owning a home is the American dream, yet it remains an unfulfilled dream for many of us because we never get that mortgage paid off. Until then your bank owns your home and you pay a small fortune in interest payments. The banks know that most homeowners will not stay in the home for more than 7 years, as this is the average time a person will dwell in the home. Because of this, the banks put most of the charges and interest rates in the first few years of the mortgage which means that the homeowner is mostly paying interest on the loan and not reducing the principal at all. At the end of a 30 year fixed mortgage, you may end up paying more interest than what the actual original price of the home was.
So how do you pay off your mortgage early?
Well there is a new approach to paying off your mortgage in a way that does it much sooner than you think. How would you like to pay off the mortgage in 5 years, save a ton in interest and turn your dream into a reality ?
Mortgage Cycle of Debt
It may seem hard to believe, because the banks are never going to tell you this. The bank have secrets they don’t want you to know, however there are people out there today that are actually achieving this seemingly unrealistic goal. One of the things that will help pay off the mortgage early and get out of the cycle of debt is to take all of your income and put it where it can work harder for you . You can actually use the banks system to make money instead of losing it to interest.
Did you know that the banks have a system in which they calculate the interest on your mortgage based on the daily principal balance? So when you make a monthly payment , you are actually paying more interest than if you were to make bi-monthly payments. This is because if you make more payments in a given month, you end up keeping your daily balance at a lower level, thus saving you a lot of interest. Your money can then go to paying off more of the principal resulting in shortening your mortgage term.
There is also some great software available to help homeowners calculate their finances and pay off the mortgage early. Now the good softwares may cost you a bit of money, however they can save you literally tens of thousands of dollars over the course of the mortgage term. However you can do this with out any software if you know the concept involved.
Traditionally most people deposit their pay checks into their checking account and withdraw money to pay for living expenses. In most cases the money sitting in your bank account generates you 0% interest, not to mention the monthly fees and charges they hit you with every month. Not only do you lose money this way, you are still charged with the mortgage interest rate, let’s assume that it is 6% for example. The banks then withdraw your mortgage payment out of your account and actually lend it to other borrowers for a much higher interest rate. So in effect, not only are they charging you for bank fees and daily interest on your mortgage payments, they are actually lending your money to make a profit at your expense. Great system for them and a lousy one for us right?
Well there is good news. What the banks don’t want you to know is that you can actually park your money into your mortgage instead of wasting it in a traditional bank account. Now you may be asking yourself , How do I get my money out for living expenses ? Well there are ways that you can do this as well .
There is such a thing called the ‘money merge account ‘in which you can combine your mortgage and basic bank transactions into 1 account. This will reduce your daily principal as you have money in the account yet you also have the ability to withdraw your money for personal use. Although your cash balance may go down at the end of the month, the time your money was in the account contributed to lowering your interest rates in the meantime. If you repeat this cycle throughout the years it will reduce your principal mortgage at a much higher rate.
Stay tuned for more information on money merge accounts and what is required for you to be able to get out of the mortgage cycle of debt.
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