No one likes to be saddled with a long-term debt such as a 30-year mortgage. Because of this many ways have been thought up where people can pay off their mortgages well ahead of schedule.

These methods sometimes promise you’ll be paid off in 7 years, some 10 years, 15 years and some incredibly promise you will pay off your mortgage 26 years ahead of schedule. I’m sorry, but now I must hit you with sobering thought number 2: there are only two ways to pay off your mortgage early!

By the end of this article you will find out what these two ways are, but first let’s talk about some of the not so real ways.

Accelerator mortgage

With an accelerator mortgage, you pay every cent you make into a mortgage account and at the end of the month your mortgage payment is taken out of the account. Proponents of the accelerator mortgage say it works because this account you pay into pays interest and that compounding interest negates the interest you are paying on the mortgage.

However, when the agent sets up your accelerator account, he/she asks you how much you want to leave in your savings each month to be paid toward the mortgage. You will even be egged on. They will ask, “$250, $500, $1,000?” $1,000! Heck, if you paid that much toward your mortgage each month, you would pay off any mortgage way ahead of schedule!

If you were to say, “well, nothing. I don’t have anything left after groceries and other expenses.” They won’t want to give you the mortgage because the compounding interest in this mortgage account means very, very little. The heart of the accelerator plan is you pay extra principal in the way of savings left in your account each month.

Biweekly, Bimonthly and Weekly Plans

With the biweekly plan you are led to believe making two payments a month, which together equal the same amount you have been, paying monthly, will take 7 years off the time it takes to pay off the mortgage.

In reality, with a biweekly plan you make 26 half payments or 13 monthly payments each year instead of 12 so, of course, you will pay off your mortgage a lot sooner. The backbone of this plan is you are led to believe you will not be paying more money each month, but the fact there is more than 4 weeks in a month is the real reason it works. Oh, and by the way, for getting fooled like this you get the pleasure of paying about $1,000 upfront in fees to convert to the biweekly plan!

There is no such thing as a bimonthly plan. It is just a Biweekly plan improperly titled. Weekly plans are the same as biweekly plans cut up into smaller payments, but the same arithmetic applies.

The only two ways

The conclusion is there are only two ways to pay off a mortgage ahead of time. One is to pay more principal each month. For instance, the payment on a 30-year mortgage for $200,000 at 6.25% is $1,231. However, if you pay an extra $270 each month, you will pay off the mortgage in full, 11 years ahead of schedule and you will save over $100,000!

The only other option you may be able to get that will help you pay your mortgage earlier is to get a lower interest rate and continue to make the same monthly payment. In the example above, if you were able to refinance at 5.50% but you continued to pay $1,231 monthly, you would have that mortgage paid in full in 25 years, instead of 30 years.

Still, paying $1,231 monthly is the same as making additional payments toward principal because the scheduled monthly payment for $200,000 at 5.50% is $1,135. So, here is the final conclusion; you can try to fool math, but it is just as futile as trying to fool Mother Nature. You can’t do it! To get your mortgage paid ahead of time, you have to make principal payments ahead of time one way or another. That is all there is to it!

Ed Lathrop is a successful real estate investor. He has developed EzCalculator, a mortgage calculator that shows you how to save $100,000 on your mortgage. Come visit this free site at free financial calculator . Also, find out how to get and use your amortization table to make big money at amortization schedules free. These sites are not owned by any lender, so no one will harass you for visiting!

There’re various reasons why selling should be done in this way. The first and the foremost reason is that debt on property is high to such an extent that if bought prior to auction there would not be any potential for profit. Secondly, seller would not sell prior to auction. Thirdly, seller cannot be found. Lastly, you would have more money on hand beforehand.

Anyone wishing of purchasing foreclosed properties (at the auction) or involved in foreclosure real estate must make it a point of attending a few in order to get acquainted with way of their working.

Certain great opportunities are provided by them, but, at the same time, trappings are also made available. Let some light be thrown on the things to be expected here.

Expectations

Firstly, they’re very quick. Just a bit of delay, and you missed it. There ought to be a greater number of spectators as compared to the qualified bidders over here, like auction of any other type. Qualifications of everyone can be verified by having shown the certified check prior to beginning of the auction.

This would prove to be an excellent way of knowing that person you are bidding against happens to be qualified for raising a bid, thereby causing you of losing real money.

Research

Any of the serious bidders should go for a thorough research with regards to propert’s monetary situation. You are allowed of bidding up to around $375000 on the property having value worth $500000, thereby having thought that good deal is obtained.

Find out that there had been $150000 first mortgage in place still. Having known about such sort of first mortgage, you can have your bid verified for being above the first, and not being subject to first. Thus, bid of yours would seem to be from base price, that too, over first mortgage.

If you happen to be higher bidder with respect to the second mortgage, VA or first FHA can be taken over as an assumable loan. If bank happens to be the greatest bidder on 2nd, it can have you substituted, along with lending FHA money. Bank usually acts as high bidder, in the states where the auctions need cash deals. At times, private investor can appear to be high bidder. At times, auction might get postponed as well.

Things to be known

Based on state you reside in, the cash required on the auction day is 10%-100%. If you go on with bidding and winning in terms of foreclosure real estate, have your mind changed after having the deposit put down. You can have the deposit forfeited and hold liable if mind is changed.

Have bidding instructions of bank with auctioneer as there is a likelihood of lender bidding substantially less as compared to debt owed by them. The laws and rules differ from one state to the other, but loads of information can be obtained on local procedure concerned with foreclosure real estate, along with the bidding instructions through office of sheriff or office clerk of the court.

Charles Bretz is a Financial Advisor and Author on Money Matters.Get Your Free Money Guide. Click Here

Here’s what you need to know when shopping for a mortgage for your new piece of real estate:

Know your credit report and credit score. Yes, this number is really important. It affects the rate and amount you get to borrow or if you qualify to borrow at all. Start by getting a copy of your credit report and get your score if you are even thinking of buying real estate. Things that bank looks at on your report are, number of open accounts, amount of available credit, late payments, paid off accounts and on-time payments. Go through and close all accounts you don’t use, resolve what issues you can and don’t open any new accounts until or after the mortgage is secured.

Know your finances. Before you apply, know what you can afford to pay each month by going over your budget. Think about your future finances as well. Do you know that you will be getting a yearly raise or is a promotion on the horizon? Future financial gains may affect how much you can afford and what type of loan may work best.

Know your options.

1. Conventional loans- This loan allows you to lock in to a rate and sets your payments up for a 30 or 15 year period. If you plan to stay put, this is a fairly a no-risk option.

2. Adjustable Rate Mortgage (ARM) – Many banks are offering ARMs these days. This type allows you to take out a loan at a low rate. There is usually an option of 3, 5, or 7 years to lock in this rate. After this time is passed, your loan is at the mercy of market rate changes. If you know you will be moving in 3 years, this type of loan may be a good for you. However, realize that your payment will go up at some point and budget for this spike. Just because that initial low rate allows you to afford a certain home, you have to consider the long term financial commitment so that you don’t get into trouble.

3. Interest-only loans- This type is exactly what it says. Your payment is on the interest only. It may allow you to afford the home, but in the long run, it may not be a good idea. If you decide to sell at some point, you will find that you have no equity in the real estate property and if market values have fallen, you will owe more than it is worth.

Know your terms.
1. Mortgage rate and APR- The mortgage rate is what the bank is offering on your loan. The APR is the actual rate you will pay after fees.

2. Discount Points- you can buy these to reduce your APR and the amount of fees.

3. Private mortgage insurance (PMI)- this is tacked onto your payment if you don’t have a 20% down-payment as a protective measure for the lender; in case you default on your loan.

4. Escrow- also added to your final payment. This account is for paying the taxes and insurance on your real estate property throughout the year.
Know what documents you need. Gather all W-2s and tax returns for the past couple of years; several months back pay stubs, bank statements of the past couple of months. You will need all of these as proof of income when you apply.

As you can see, there are a lot of things to consider, when financing real estate. If you have a hard time putting it all together, don’t be afraid to ask questions to your lenders or get a financial planner to help you to work it out. The most important thing is to arm yourself with knowledge and carefully consider all of your options before jumping into this monumental financial commitment.

Know- how of different mortgage types are beneficial while financing your home. Awareness of financing and payment option can make things easier. Hendersonville NC real estate firm will assist you in financial process. For more information, visit preferredrealestatecenter.com .

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