Mortgage Acceleration Part I: What is it?
Posted by Duane Duggan on Tuesday, May 23rd, 2017
Over the next few weeks, I will be posting excerpts on mortgage acceleration from my book REALTOR® for Life. You can watch and subscribe to the RE/MAX of Boulder podcast channel for behind the scenes content.
The article below was also published in the At Home section of the Boulder Daily Camera
In the final stage of buying a home, while sitting at the closing table, it is always a bit of a joke when the happy home buyers are asked to sign the loan disclosures showing how much interest they will pay over the life of their 30-year loan. Oftentimes they say things like “Oh, I’ll be dead by then anyway”, or “Wow, I had no idea!”.
Closing on your home creates a perfect opportunity to put a system in place to build equity and real estate wealth by applying mortgage acceleration techniques. The ideas about mortgage acceleration have changed many times over the years. The Depression-era generation celebrated mortgage-burning parties when the final payment was made. The following generation kept mortgage balances high for tax deductibility and in theory, “invested” the cash for a better return. Then came the next generation, with home values skyrocketing, they used their homes as cash machines, pulling cash out for consumer items and lengthening the term of their loan, and in theory, never paying off their mortgage. This resulted with many losing their homes to foreclosure. So which generation is the smartest? The answer is not so simple. It takes quite a bit of study to figure it out.
What if you or your clients had no mortgage on your property? Would life be any different? Could you invest that cash flow that would have gone into mortgage payments into something else? There are many ways to accelerate the payoff of a mortgage and there are just as many considerations as to whether or not to pay one off early at all.
The graph below shows the structure of how a 30-year amortized loan works if no mortgage acceleration techniques are applied.
Check back next week for my breakdown of Mortgage Acceleration Techniques, and of course, order or download REALTOR® for Life.
About Duane Duggan: Duane Duggan has been a REALTOR® for RE/MAX of Boulder in Colorado since 1982 and has facilitated over 2,500 transactions over his career, the vast majority from repeat and referred clients. He has been awarded two of the highest honors bestowed by RE/MAX International: the Lifetime Achievement Award and the Circle of Legends Award. Living the life of a REALTOR and being immersed in real estate lead to the inception of his book, REALTOR® for Life.
To get in touch, email Duane at DuaneDuggan@BoulderCo.com or call 303-441-5611