SL 6: Which Accelerated Program Works Best
the pros and cons of each accelerate option
Using Lump Sum Payments
you control the amount that you send in. You have the flexibility to send in greater or lesser amounts when income circumstances allow.
having the discipline to send in the appropriate amount. Unless you have a budget monitoring system, it will be difficult to plan the right amount to reduce your mortgage fast.
You can setup automatic draft. But you must budget to make sure you can meet each monthly payment obligation.
Using Accelerated Payments
the bank automatically debits your banking account for the bi-weekly payment. Over the year, you will make one extra payment that will reduce your mortgage.
unless you make lump sum payments in addition to your accelerated plan, the accelerated plan will only knock off only 6-7 years under a 30-year plan.
Refinance Your Mortgage
you can cut 15 years off your mortgage plan by refinancing to a 15-year plan. But your overall payment will increase. Unless you can significantly reduce your current rate, your best option is to take the payment difference and make a monthly lump sum payment.
it will cost you money to refinance your mortgage. The new interest rate on your refinancing loan should be 1.5%-2.0% lower than your current mortgage loan rate in order to break-even.
view this home refinancing break-even calculation to estimate your cost to refinance
Now Let's Look At Another Option
- It's Called the Mortgage Payoff Accelerated Program:
under this program, you can cut your mortgage term by 1/3rd or more without changing your current cash flow position or refinancing.
You can view this topic in the next slide.