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Old April 8th, 2015, 08:09 PM
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Question Mortgage Accelerator

Anybody ever use a line of credit ( HELOC) to reduce the number if years on a home loan?
I've been reading up on it and playing with excel to figure out how it can work.

Cheers...
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  #2  
Old April 8th, 2015, 08:40 PM
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As I read, you use the HELOC to work against the mortgage interest...
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Old April 8th, 2015, 09:06 PM
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As I understand it. If you were to put in a full month pymt extra each year you will reduce your pymts from a lets say 30 yr to 22 yrs or something. Because with that one extra payment you are paying against your amount and not the interest.
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Old April 8th, 2015, 10:17 PM
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Just set up a simple amortization calculator on Excel. Include a colunm for extra principal.

Adjust the extra principal amount to make the loan match the payoff period you want.

Compound interest is indeed the eighth wonder of the world...make it work for you instead of your mortgage lender.

Our last "30 year" mortgage was paid off in 12 years. This one will last about 13 years.
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Old April 8th, 2015, 11:25 PM
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The ultimate home loan for a consumer would be one which recasts itself each time you pay additional principal. Paying extra principal will indeed reduce the time to payoff, but not as quickly as if it was "re-amortized" each month in which additional principal was paid.

Since this doesn't happen most of the time, the principal & interest paid each month will be based on the original amortization of the original loan value- i.e. the interest portion($) of your payment each month won't change even though additional principal has been paid.

This is why banks charge anywhere from $250 to $5k to perform a modification to your loan which equates to a simple excel function.
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Old April 9th, 2015, 12:01 AM
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Quote:
Originally Posted by Grover View Post
Anybody ever use a line of credit ( HELOC) to reduce the number if years on a home loan?
I've been reading up on it and playing with excel to figure out how it can work.

Cheers...
This makes no sense....you have a loan a mortgage at a low rate yet you want to get another loan to pay part of it down...and this heloc will have a higher rate. and at the end of the day you still have the same balance.

If you want to pay down your mortgage...make extra payments or take one payment and divide over 12 months or pay twice a month.

Throw more cash at it.
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Old April 9th, 2015, 07:31 AM
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Helocs don't require you to pay back principal until you are usually 10 years into the loan. Can you avoid that trap and pay down the principal?

As an ex Mortgage Loan officer, I say we should all have a Heloc in our back pocket for those major emergency moments.

I'm leery of your idea simply because its potentially dangerous to add a loan to pay off a loan.
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Old April 9th, 2015, 07:52 AM
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Quote:
Originally Posted by Grover View Post
Anybody ever use a line of credit ( HELOC) to reduce the number if years on a home loan? I've been reading up on it and playing with excel to figure out how it can work. Cheers...
As others are saying, you need to compare the cash out flow with 2 loans vs the option of simply throwing excess cash at the original mortgage. With out doing a with and without comparison nobody can/should say which option is better.

The other thing to think about is the variable rates of HELOCs. Rates will be going up. Whereas your mortgage is probably fixed. If you run into a bind in the future you can stop and start your prepayment program at will. Binding your house with two loans is twice the risk of loosing your home if you think about it.

Clay
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Old April 9th, 2015, 08:06 AM
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you can also setup your mortgage (with most lenders) to pay twice a month. Then add another $100 or so to ea payment and it doubles the amount on principal - once again reducing it from 30yrs to 12-20yrs
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Old April 9th, 2015, 08:14 AM
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One more thought. Depending on who you believe the stock market could be headed for a sizable shake up. If you have funds in a 401k maybe accessing them via loan to put against your mortgage is an option to consider. Again, I recommend a with/without comparison to be certain it is a viable option.

Clay
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Old April 9th, 2015, 10:08 AM
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Quote:
Originally Posted by whitelandy33 View Post
This makes no sense....you have a loan a mortgage at a low rate yet you want to get another loan to pay part of it down...and this heloc will have a higher rate. and at the end of the day you still have the same balance.

If you want to pay down your mortgage...make extra payments or take one payment and divide over 12 months or pay twice a month.

Throw more cash at it.

This, or just refi into lower rate 30y fixed
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  #12  
Old April 9th, 2015, 10:28 AM
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Ok, not that I know anything about the Finance World

But using a LOAN to pay another LOAN is the dumbest idea in the world

Is like people dropping money on 401k while having outstanding Student loans, seriously

Don't need complicated EXCEL WORKSHEETS, FINANCIAL CALCULATORS or anything like that to figure out that while you might feel warm a cozy on one side of the deal, you are being screwed on the other


The best advise was given before here... do extra payments, if you can afford it , do weekly Mortgage payments ( boy that certainly pisses off the Lender - and I love doing that ) , or bi-weekly, throw few dollars ( or the amount of payment you were going to do to your HELOC ) and before you know it, your mortgage is gone
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Old April 9th, 2015, 10:34 AM
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Quote:
Originally Posted by Rugbier View Post
Ok, not that I know anything about the Finance World

But using a LOAN to pay another LOAN is the dumbest idea in the world

Is like people dropping money on 401k while having outstanding Student loans, seriously

Don't need complicated EXCEL WORKSHEETS, FINANCIAL CALCULATORS or anything like that to figure out that while you might feel warm a cozy on one side of the deal, you are being screwed on the other


The best advise was given before here... do extra payments, if you can afford it , do weekly Mortgage payments ( boy that certainly pisses off the Lender - and I love doing that ) , or bi-weekly, throw few dollars ( or the amount of payment you were going to do to your HELOC ) and before you know it, your mortgage is gone
100% accurate.
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  #14  
Old April 9th, 2015, 10:44 AM
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Quote:
Originally Posted by Rugbier View Post
Ok, not that I know anything about the Finance World

But using a LOAN to pay another LOAN is the dumbest idea in the world

Is like people dropping money on 401k while having outstanding Student loans, seriously

Don't need complicated EXCEL WORKSHEETS, FINANCIAL CALCULATORS or anything like that to figure out that while you might feel warm a cozy on one side of the deal, you are being screwed on the other


The best advise was given before here... do extra payments, if you can afford it , do weekly Mortgage payments ( boy that certainly pisses off the Lender - and I love doing that ) , or bi-weekly, throw few dollars ( or the amount of payment you were going to do to your HELOC ) and before you know it, your mortgage is gone
Not necessarily. It really depends on the terms of the loan. Hell, I've used those 0% interest for 18 month credit card offers to pay off the balance on remaining loans. As long as you're sure you can pay it off before it comes due then its pretty sound. And weekly mortgage payments don't do anything if your bank only calculates once a month.
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Old April 9th, 2015, 10:56 AM
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Quote:
Originally Posted by fishEH View Post
Not necessarily. It really depends on the terms of the loan. Hell, I've used those 0% interest for 18 month credit card offers to pay off the balance on remaining loans. As long as you're sure you can pay it off before it comes due then its pretty sound. And weekly mortgage payments don't do anything if your bank only calculates once a month.
Seriously Brett?

Nowhere in the OP refers to int free bridge loans

BTW, I never heard of a Mortgage interest not compounded daily, but again, I have never done anything related to Finances. M&A or the likes
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Old April 9th, 2015, 11:15 AM
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Quote:
Originally Posted by Rugbier View Post
Ok, not that I know anything about the Finance World

But using a LOAN to pay another LOAN is the dumbest idea in the world

Is like people dropping money on 401k while having outstanding Student loans, seriously

Don't need complicated EXCEL WORKSHEETS, FINANCIAL CALCULATORS or anything like that to figure out that while you might feel warm a cozy on one side of the deal, you are being screwed on the other


The best advise was given before here... do extra payments, if you can afford it , do weekly Mortgage payments ( boy that certainly pisses off the Lender - and I love doing that ) , or bi-weekly, throw few dollars ( or the amount of payment you were going to do to your HELOC ) and before you know it, your mortgage is gone
Appreciate the first part of your post confirming what I said.

Even if you make one additional payment a year, on a thirty year mortgage you can cull years off a mortgage.

Heads up, rates are going UP. There is no getting around it. PM me if you want to talk further about mortgages in MA or NH.
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Old April 9th, 2015, 11:43 AM
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Here is a flow chart.
Basically the HELOC is used as a funnel for cash flow.
I would think if this does shave years off the mortgage, everyone would be doing it...
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Old April 9th, 2015, 02:31 PM
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Also HELOC's usually have an annual fee attached. If there is no balance my bank charges $50/year. I Keep it open for the what if's in life but have not charged anything on it in probably 7 or 8 years. So I just wasted $350 to $400 for a little piece of mind.

But as others have stated I think you are complicating the issue. Just pay extra each month.

I work on commission so my checks vary. When I get a good one I pay extra, when I don't I pay the contract amount.
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Old April 9th, 2015, 02:41 PM
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Quote:
Originally Posted by Grover View Post
Anybody ever use a line of credit ( HELOC) to reduce the number if years on a home loan?
I've been reading up on it and playing with excel to figure out how it can work.

Cheers...

Yes I have heard of it. My Aunt did it.


She had a traditional loan with a fixed rate of lets say 6% with 7-8 years left on it. She took a HELOC at sub 3% and paid off her house, she will make the same payment but now has options if she needs to.
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Old April 9th, 2015, 03:13 PM
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Originally Posted by UnfrozenCaveman View Post
Just set up a simple amortization calculator on Excel. Include a colunm for extra principal.

Adjust the extra principal amount to make the loan match the payoff period you want.

Compound interest is indeed the eighth wonder of the world...make it work for you instead of your mortgage lender.

Our last "30 year" mortgage was paid off in 12 years. This one will last about 13 years.
This sounds like owner financing. I have bought and sold several properties this way... with amortization tables. So nice to pay off a mortgage early and in a few years more than the typical car loan. I would pay the note plus 1/2 or double it and have it go straight to principle...and who ever I sold to could do the same. Works great for everyone and keeps it simple with no banks or lending institutions to be involved. I'm going to be doing a couple more this year...either an owner finance or just a straight swap of properties.
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