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Illustrative Example

Reducing the Loan Balance Fast
You need to reduce the mortgage balance up-front in order to get more of your mortgage payment paying principal. For example, what if you made a $5,000 up-front payment. You would reduce your 30-year repayment term by 4 years:

(use this excel worksheet to run your own numbers)

$200,000 Mortgage 30 Year Term - 6% APR Monthly Lump Sum Payments $0 $5,000 Total Payments Made $431,676.38 $408,373.67 Total Interest Paid $231,676.38 $208,373.67 Total Principal Paid $200,000.00 $200,000.00 Total Interest Saved $23,302.71 Mortgage Payoff Time 30 Years 28.1 Years

Let's say you made 7 consecutive $5,000 lump sum payments each year at 12 months apart;

In other words, you made a lump sum payment for $5,000 on Month 1; another lump sum payment for $5,000 on Month 13; and the final lump sum payment of $5,000 on Month 73.

How much interest would this save you?

$200,000 Mortgage 30 Year Term - 6% APR Monthly Lump Sum Payments $0 7 - $5,000 Total Payments $431,676.38 $349,775.27 Total Interest Paid $231,676.38 $133,695.03 Total Principal Paid $200,000.00 $200,000.00 Total Interest Saved $97,981.35 Mortgage Payoff Time 30 Years 20.9 Years

The Magic is Paying Up-Front

The goal is to get more of your regular mortgage monthly payment paying off the principal. By making large lump sum payments up-front, you can reach your mid-point must quicker.

In our example above, we were able to meet the mid-point within 9.3 years (vs. 18.6 years with no lump-payments)

mid-point is where your mortgage payment begins to pay more on principal than on interest

But Who Has $35,000 to Invest?

This is where the mortgage payoff plan comes into play. You will use a Home Equity Line of Credit (HELOC) as your money account. All of your income and living expenses come into and out of the HELOC giving you access to funds at "canceling interest".

The HELOC to Function as a Money Account:

Instead of using your current bank checking account for receiving and paying funds, you will use your HELOC as your money account. All of your income and living expenses come into and out of the HELOC.

In other words, all of your wages, paychecks, and other related income will be deposited into your HELOC.

And all of your expenses such as your regular monthly mortgage payment, food, clothes, transportation, and all other living expenses will be paid by writing checks using your HELOC.

Example:
let's say your monthly net income is $5,000 and your monthly living expenses is $4,000.

Let also assume you get paid 2 times per month and that living expenses (including your mortgage payment) average out the same per week.

Your bank checking account would look like this:

Date From To Withdrawal Deposit Balance 07/01 Employ Direct Deposit   $2500 $2500 07/01 Checking Mortgage Pay $1250   $1250 07/07 Checking Living $1000   $250 07/15 Employ Direct Deposit   $2500 $2750 07/15 Checking Auto Loan $500   $2250 07/20 Checking Living $500   $1750 07/31 Checking Living $750   $1000 Total   $4,000 $5,000 $1,000

What the diagram illustrated is that the bank had access to your positive balance throughout the month paying you zero or little interest for that use.

Banks then turn around and use that money to lend to consumers and businesses at higher rates.

The HELOC account becomes the money source that makes the lump sum payments to reduce your mortgage loan fast. Let's illustrate an example.

The HELOC will be used to advance yourself a lump-sum payment to pay on your mortgage:

HELOC Account Starting Credit Line Balance: $60,000 Date From To Advance from HELOC Payment to HELOC Balance Owned Aug Beginning Balance     $0 Aug HELOC Advance to Pay down Mortgage $5000   $5,000 Aug HELOC Living Expenses $4000   $9,500 Aug Pay Paycheck   $5000 $4,000 Total HELOC   $9,000 $5,000 $4,000

Reducing the Equity Line Balance:
your discretional income (income that is in excess of monthly living expenses) will be used to pay down your equity line balance.

When that balance has dropped below $500, you will then make another lump-sum payment to reduce your mortgage loan balance:

HELOC Account Starting Credit Line Balance: $60,000 Month HELOC Activity Advances from HELOC Payments to HELOC Balance Owned Sep Beginning Balance     $4000 Sep Total Activity $4000 $5000 $3000 Oct Total Activity $4000 $5000 $2000 Nov Total Activity $4000 $5000 $1000 Dec Total Activity $4000 $5000 $0 Jan Beginning Balance     $0 Jan HELOC Pay Down Mortgage $5000   $5000 Jan HELOC Living Expenses $4000   $9,000 Jan Pay Paycheck   $5000 $4000 Jan Total HELOC $9000 $5,000 $4000

As the illustration shows, your discretionary income (the income deposted amount minus your expenses) remains into your home equity line account to lower the debt balance.

When your debt balance drops to a pre-determined amount, you will then make another scheduled payment to paydown your mortgage. You will repeat the cycle over again until you payoff your mortgage.

Need More Information?

• First Step:
  link to our www.PickMyMortgage.com payoff module to view how mortgage interest works:
  go to slide demonstration
  
  (links to our www.PickMyMortgage center)
  
  
  
• Second Step:
  link to our mortgage payoff module to review tips on paying off your mortgage fast:
  go to slide show
  
  
  
• Third Step:
  use this 10-step success plan for implementing and managing your mortgage payoff program:
  view 10-step success plan
  
  
  
• Fourth Step:
  get started on paying off your mortgage FAST:
  view get started