With the current economical difficulties we are going through, we have to find ways to maximize the use of our money. To do so, you want to change the way you see money and how you can shift your habits to take advantage of every dollar you make.
For instances, most of us are ok with keeping most of our money in a savings or checking account where we get a very small return. In this example, the banks are the ones is using our money to make themselves richer.
Another typical example is the traditional mortgage. In a typical 30 year home mortgage, it’s not until the 20 years and 2 months mark that we make the same amount toward our principal that we do toward the interest.
Since the average American only stays in their home for 5-7 years, they barely make a dent in the principal of their mortgage. In other words, the structure of the mortgage heavily favors banks because almost all of your monthly payments go toward the interest portion.
For over twenty years, people in countries like Australia, the U.K. and Canada have used mortgage accelerator programs to pay off their homes in 10-15 years saving an average of $150,000 on their mortgages. This type of programs is now available in the U.S.
A mortgage accelerator works without having to make any additional payments toward the mortgage. It works in the following way:
1. At the start of the month, you use a piece of software to find out the optimal amount to pay toward your first mortgage to ensure you are paying as little in interest as possible. You use an advance line of credit (HELOC) to pay for this mortgage payment. This operation decreases the debt in your first home mortgage and moves you further down the amortization schedule.
2. You then deposit your monthly income in the HELOC in order to reduce the balance on your HELOC. By doing so, you decrease the interest paid in the HELOC.
3. You charge all of your daily expenses on a credit card to allow money to sit in the HELOC for as long as possible.
4. At the end of the month, you pay the credit card off before incurring any interest charges from the credit card company.
By doing a few changes in your financial habits, you can start making the bank’s money work for you and no the other way around. Using other people’s money (the bank’s money) is one of the surest and fastest ways to become financially independent.
Although it make take a while to get use to the changes, you can think of the other alternative; After all, how much effort and time would it take you to make the money you would save if you could pay off your home mortgage in 10 years?