Be Weary of Mortgage Acceleration Scams

If you’ve got a mortgage and are trying to pay it down as quickly as possible, then you’ve probably heard of mortgage accelerators. These are designed to help you pay off your mortgage in less time than it would normally take you. It helps you save money long-term on interest payments.

There’s obviously motivation to shorten the length of your mortgage, but there is great reason to be extra cautious when dealing with one of these companies. Sometimes they are too good to be true.

 How do mortgage accelerators work?

Both kinds of mortgage accelerators are designed to assist you to budget your finances.

One of the kinds of mortgage accelerators asks the borrower to send the accelerator company money, and this company will send checks biweekly to your mortgage lender. Usually this product has an initiation fee of around roughly $300, as well as a low monthly fee, which is less than $10. Biweekly payments help you tackle your mortgage debt quickly, but this isn’t sometime you can’t do on your own.

The second type of accelerator deposits your paychecks into a specific account and acts as a line of credit. As the months go by, your payments draw against this balance, and whatever is left at the end of the month goes towards your mortgage.

Here’s the deal though: a good number of these accelerator companies have very high upfront costs for the software, which is used to manage your cash flow. While having to pay interest against the line of credit whenever you draw against it, if you use this to pay down your mortgage, chances are you are paying more in interest to this company than you would the actual interest for the mortgage itself.

Instead of paying for a service to help you budget from one loan to the next, you can find the same help through different budgeting tricks. You can design a whole new plan on your own that won’t cost a fee here, or interest payments there.

Round up payments

By choosing to round your payment up to the next $100, or $500, you can erase years off your mortgage payments. This money is basically paying for the future, lowering the amount of interest you pay total.

Make an extra payment

Making that extra payment can make a big difference in a year. If you make half of a mortgage payment every two weeks (vs. a full one every month) you will see an extra payment. This way you may 26 payments a year. Another way to make an extra payment is to calculate a new payment by multiplying your monthly payment by 13 and then divide it by 12.

Refinance

If you can handle making high payments, refinancing your loan from a 30-year to a 15 or 20-year, will shorten the length of your loan, and also yield lower interest payments. You should highly consider your job and cash intake before making this leap. Paying more could become a giant problem if you suddenly become unemployed.

Make a lump-sum payment

When you have a nominal balance with little to no interest to deduct, a lump-sum payment could omit this debt. This can only work if there is cash available, and you don’t plan to spend the money elsewhere.  

I hope this has shed some light on the matter, and can lead you to decide what is best for your situation. Best of luck!

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