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!

The reason? The borrower is seeking financing for an investment, or rental, property. The increase in rate seems significant so the borrower inquires about it. The loan officer explains that an investment property represents a higher degree of risk for a lender.

Then, what happens all too often, unscrupulous loan officers advise their clients to simply state that the home will be used as a second residence. Second homes typically carry the same rate of interest as a primary residence.

This is a very big mistake for two reasons.

The first reason is that this misrepresentation is a crime! Here is the exact wording that a borrower is asked to sign at the closing:

I have read and understand this Statement of Applicant. I understand that the making of false certifications or declarations is a crime under section 1014 of Title 18 of the United States Code.

You may not see this wording with your initial application but it will be there in the closing package. Most closings contain a form specifically addressing occupancy with the above wording directly below the statement.

Few people want to break the law. But adding the additional cost to words like “Oh, people do this all the time” from the loan officer, many people opt to mislead the lender. Of course the loan officer is also breaking the law by advising their client to do this, but very few ever get caught. But borrowers can get cauhght. Lenders check for occupancy on many of their loans. They check phone and tax records. It’s actually pretty simple to catch these law breakers but because of the volume of loans that lenders provide, few people are ever convicted of this crime. And that is why so many people “take the chance”.

But what is really puzzling about all this, is for how little people are willing to break the law. Fannie Mae and Freddie Mac are two government-sponsored agencies that purchase a large majority of the mortgages loaned in this country. The agencies have a set of rules. or “guidelines”. If a loan falls within those guidelines, either entity will purchase the loan. The agencies take no issue with purchasing loans secured by investment properties other than they require a slightly higher fee, or interest rate.

How much higher?

That depends on how much is being borrowed. With a 10% down payment, there is an add-on of 2.5 points – each “point” represents 1% of the amount being borrowed. A $200,000 loan amount will cost a borrower $5,000 in order to get the very same rate they would get for a primary residence. A 20% down payment would have an add-on of 2 points and down payments of 25% or more would have an additional 1.5%. But these add-ons DO NOT have to be paid in upfront cash.

A borrower can elect to accept a higher interest rate rather than pay the extra fee. When paying points, borrowers are “buying down” the interest rate. The longer they have the mortgage, the more beneficial the rate “buy-down” becomes.

In a typically buy-down, one point (1% of the loan amount) will “buy down” the interest rate approximately 1/4 of 1%. If 1 point = 1/4%, then, 1/2 point = 1/8%. So a total of 2.5 points will be an approximate increase of 5/8% (0.625%). 2 points will be about 1/2% increase and 1.5 points will be around 3/8% (0.375%).

Going back to the above example of a $200,000 mortgage, at current interest rates, an increase of 5/8% adds $82 to the payment; a 1/2% increase is an additional $66 and 3/8% would add $49. Is it worth those kinds of numbers to break the law? I hope you feel like me and not even think twice.

Another part of this equation is that it becomes easier to qualify for an investment property because lenders will often use a portion of the projected rental income and add that to the borrowers regular income.

So follow Spike Lee’s advice and “Do the right thing!”

Ron Borg is the founder & CEO of Mortgage123.com – offering mortgage shoppers a safer way to comparison shop online.
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A foreclosure is not a process that is private. In fact, it is quite public. A notice may be published in the newspaper, and a sheriff can show up at your door and give you a notice that you must vacate your property. Police have been known to enter a home and start moving furniture out into the lawn in order to vacate homes when people ignore the deadline on their notice. Can you imagine how humiliating it would be? Imagine living in an upscale neighborhood in San Diego, only to be thrown out of your own home while your neighbor stares on in disbelief from the driver’s side of his BMW. Foreclosures can happen in any neighborhood and in any economic market.

The nightmare of the foreclosure doesn’t end when you vacate your property. In fact, the long-term financial devastation of a foreclosure is probably the worst part. It will remain on your credit for at least ten years. This is not a small blemish, either. It isn’t like a missed credit card payment or a forgotten phone bill. A foreclosure can even prevent you from renting a home for yourself or your family. If you couldn’t buy a house and no one would rent one to you, where would you live?

The credit scar isn’t isolated to home buying. Even if your financial state bounces back and you are making double the money you were when your house was foreclosed, you will have a very difficult time finding an auto loan or any other line of credit. If you do, you will pay tremendous interest premiums on any amount of money you borrow because you will be considered a high risk.

It is important to note that when a home is in default, mortgage companies often will not accept less than full payment. For example, if you mail them a check for $300 but you owe $2500, they will often mail the check back to you.

Because the process is different at every mortgage company, the foreclosure process can take anywhere from two to nine months before you will be kicked out of your home. But, it doesn’t have to turn out that way.

You have options. Know that people specialize in helping preforeclosure homeowners. For example, a realtor can step in and negotiate on your behalf with your mortgage company. They will attempt to get the amount of your debt reduced so your home can be sold quickly. This process can spare you the awful experience of a foreclosure. Rather than waiting for someone to drag your sofa out into the street, call a reputable agency that specializes in foreclosures, and let them help you out of your perilous financial situation.

Kari Shea, of Shea Real Estate & Investment Group, is an accomplished business professional and community leader in the San Diego, California area. With more than 45 years of collective sales, marketing and consulting experience; the Group are master negotiators in the marketing and selling of real properties. Learn more about their services at: shea-realestate.com.

Average house prices in the UK have now risen to around GBP160,000. This means a couple buying their first home would need a deposit of at least GBP8,000 and a combined yearly income of GBP50,000. Of course, this assumes that they can still get a mortgage with a relatively high loan to value (LTV) rate of 95%.

Despite recent cuts to the base interest rate by the Bank of England, many mortgage providers are failing to pass these cuts on to consumers. In a move born from greed, mortgage providers are keen to protect their profit margins at the expense of first time buyers, looking to get a foot on the property ladder.

Equally, with so many established home owners able to use the equity from record breaking house price rises in the last few years, it is becoming more and more difficult for first time buyers to find competitive mortgages. The high LTV first time buyers require also weighs heavily against them when compared against the equity heavy home owners who are moving properties.

In the face of the deepening subprime crisis, and facing significant profit cuts or even losses, mortgage lenders are now tightening their lending criteria. The fear is that the 95% LTV mortgages days are numbered, as lenders push for larger deposits and smaller LTVs. On top of this lenders are weighting interest rates to discourage borrowers from taking up high LTV mortgages, forcing buyers to come up with much higher deposits.

The increasing cost of University education is also taking it’s toll. With UK students leaving University with an average of GBP13,000 of debt, it is taking longer for buyers to save up their deposits. Student loans are no longer the sole source of debt for students, with reckless lending by banks and a number of credit cards aimed at students all increasing the burden of debt for many young people.

Juggling their existing debts while struggling to qualify for lenders’ increasingly harsh mortgage qualification criteria is making mortgages for first time buyers tougher than ever. With a gloomy financial outlook, both for the UK and globally, this trend looks set to continue for some time.

Tom Kranz writes articles on debt prevention and management, debt management solutions, and debt management programs. His articles regular appear on finance-portal.co.uk.

Unfortunately, there is a lot more involved in a monthly house payment than principle and interest. It is these extras that can make the difference between making mortgage payments with ease, and foreclosure.

In this article you will find out how to calculate a mortgage payment the right way, in its entirety. By doing this, you will borrow an amount of money you will be able to pay back without stress. This will make it easier to budget your money without fear of getting behind on your payments.

Principal and Interest are the Starting Point

$100,000 financed for 30 years at 7% requires a mortgage payment of $665.30. Knowing this in today’s market gives you a heads up when you need to quickly estimate a mortgage payment. Of course, the mortgage payment you will be estimating will be the interest and principle only. This is the starting ground from which your monthly house payment will be calculated.

For simplicity’s sake, we will say you are thinking of buying a home where you will need a mortgage of $200,000 and the going interest rate is 7% and, like almost everyone else, you will be financing for 30 years. This means your principle and interest payment will be 2 times $665.30 or, $1,330.60 a month. Now, what else will be added to this amount each month?

Taxes and Insurance

Most lenders make sure you have homeowner’s insurance. They will also see to it you pay your property taxes. They do this, not so much because they are nice guys, but because they don’t want somebody else to take your property away from them. How could this happen?

If someone got hurt on your property and successfully sewed you, they could take everything you had, including your house. This would give your lender a legal burden they wouldn’t want or need. To prevent this from happening, the lender usually collects money from you each month to pay for your homeowner’s policy. This way you and they will be protected against this kind of suit.

Another entity that could fight your lender for ownership of your house is the local government and this is exactly what they will do if you default on your property taxes. For this reason, the lender will collect money from you every month to be used to pay your property taxes.

You can figure your yearly property tax will cost you at least, 1 to 2% of the worth of your home. So, on a $240,000 property, you can guess you will be paying $2,400 to $4,800 a year. This calculates to $200 to $400 a month.

This amount will depend upon where you live. You should be familiar with a town’s mill rate before you buy a home there. Your homeowner’s policy will cost about $700 to $1,000 a year, so you can figure around $75 a month for this expense.

Water and Sewer

Another pair of monthly housing expenses are water and sewer. If you live in the city, this is a classic case where they get you coming and going. City water will easily cost you $50 a month and the sewer, which is just another word for tax, will cost you, in some cities, about $1,000 a year, which figures out to $85 a month.

If you live out of the city, your water and sewer charges become the cost of the upkeep of your well and septic system. However, after all is said and done, one problem with either one of these things will cost you an amount that will be close to what the cost is for city water and sewer.

These costs will come at much larger intervals than a monthly expense but they will be much greater amounts. In other words, it all evens up in the long run. Or should I say it all comes out in the wash?

Your Payment is Bigger Than the Calculator Told You

The end of the story is, to pay this $200,000 mortgage; you will need to pay $1,330 a month for interest and principal. Plus, you will be paying, let’s say, $300 a month property taxes and $85 a month for homeowner’s insurance. So far, this amounts to $1,710 monthly. Then add $50 for water and $85 for sewer and you will come up with $1,850 a month for your real mortgage payment.

Of course, there are more expenses required to live, but taxes and insurance, along with water and sewer are things that people who rent don’t ordinarily pay. It is knowing about these expenses in advance that is the key to realizing you could be overextending yourself financially thus, risking foreclosure. So, be sure to calculate your complete monthly mortgage payment before you say, “I’ll take 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 your amortization schedule and use it to save big money at: Amortization Schedules Free. These sites are not owned by any lender, so no one will harass you for visiting!