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How to Pay Off Your Mortgage Early

Written by Nickel - 124 Comments

Should you payoff your mortgage early? I asked that question a couple of weeks ago, and the majority of respondents said “yes.” With that in mind, I thought I’d put together a list of strategies for doing just that…

Refinance your mortgage to a shorter term

If you refinance your mortgage to a shorter term, say from thirty to fifteen years, you can dramatically reduce the time required to payoff your mortgage. You can see for yourself by playing with a mortgage prepayment calculator. As an added bonus, rates are typically lower on shorter term mortgages.

The downside here is that you will have to pay closing costs, etc. (unless you opt for a “no-cost” refinance). Your mortgage payment will also increase, but what did you expect? You’ll be paying off your mortgage significantly faster, so it only makes sense that you’ll pay more per month.


Biweekly mortgage payment plans

I’ve written about biweekly mortgage payment plans in the past. The trick here is that, by sending in half of your monthly mortgage payment every two weeks, you end up making the equivalent of an extra payment every year.

Don’t believe me? Do the math. Instead of making 12 monthly payments, you’ll make 52/2 = 26 biweekly payments — the equivalent of 13 monthly payments. This will shave years off your mortgage. Moreover, if you’re paid on a biweekly basis, this approach might match your budgeting process better than monthly payments.

The downside to biweekly payment programs is that, while many lenders offer these sorts of programs, most of them charge a fee for the privilege. While it might seem easy to justify such fees based on your long-term savings, there’s a better option…

Overpay a fixed amount every month

When we bought our first house, I started sending in an extra 10% of our total payment as an additional principal payment. Ultimately, this works out to the equivalent of 1.2 extra mortgage payments each year — on par with the biweekly plan, but without the extra fees. Since you’re sending a fixed amount everything month, this is also very easy to automate.

Pay next month’s principal this month

This is an idea that I first read about in “Wealth Without Risk.” It goes like this… When you sit down to make your mortgage payment, send an additional payment equal to next month’s principal.

If you’re not sure what next month’s principal payment will be, just double the amount from this month — that’s close enough. In case you weren’t aware, your mortgage statement should break this down for you, listing the amounts going to principal, interest, and taxes/insurance.

The primary advantage with this approach is that it really puts your mortgage payments into hyperdrive. Over time, the amount you are paying toward principal will increase, meaning that you’ll pay down your mortgage faster and faster as the months go by.

There are two primary disadvantages to this approach. The first is that the amount of your overpayment is variable (increasing each month) such that it can be hard to automate your payments. The second is that it becomes increasingly difficult to keep up with the payments since the overpayment continually accelerates as the interest portion of your payment dwindles.

The haphazard approach

If all else fails, I recommend that you at least take what I’ve termed here the haphazard approach. Whenever you run across a small windfall, simply forward it to your mortgage company as an extra principal payment. Get a check from your reward credit card? Send it in. Get a tax refund? Send it in. Find ten bucks in the gutter? You know the drill… Send it in.

Aside from the fact that this approach doesn’t put any additional strain on your budget, paying down your mortgage with found money can be kind of fun. The downside is that this approach is generally less effective than the alternatives. After all, your additional payments will typically be smaller, and will come at somewhat random intervals.

Closing thoughts

The above list is by no means exhaustive, but it’s a great starting point. If you have any other suggestions, please share them in the comments. If you’d rather invest than prepay your mortgage, that’s fine. In fact, some of the above strategies can be applied to juicing up your investments. For example, make that extra “principal” payment into a brokerage account.

The important thing is to do something.

Published on June 3rd, 2009
Modified on June 23rd, 2011 - 124 Comments
Filed under: Debt Reduction, House & Home, Mortgages

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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» Refinance and Overpay to Pay Off Your Mortgage Faster

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124 Responses to “How to Pay Off Your Mortgage Early”

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  1. 1
    Matt Jabs Says:

    First let me say that I cannot currently refinance due to being “up-side-down” on my home. :-(

    However, I have a plan…

    Shortly my high interest debt will be gone and I will have only mortgage and student loan debt. At this point I plan to pay very large extra principle payments on my 2nd mortgage, thus lowering the balance within just a few years.

    As soon as I have the balance low enough to refinance, I will refinance both mortgages into a shorter term single mortgage (most likely 15 years).

    Once that is done I will then pay double principle payments every month thus paying the mortgage off in half the time of the new term.

    Following this plan should allow me to have my home paid off within 10 years. That said, it is also written into the plan to have a fully funded emergency fund along with maxed out retirement plans prior to hitting the mortgages hard.

    In a nutshell…

    Year 1 – finish paying down high interest debt.
    Year 2 – max out retirement accounts using percentages gained from our debt elimination. And use the left over surplus to begin paying extra toward 2nd mortgage principle
    Year 3 – continue paying extra toward 2nd mortgage until I can refinance into a 15 year single mortgage (equity)
    Years 4-10.5 – pay double principle amounts every month allowing me to pay off mortgage in just 7.5 years

    My goal is 10 years, so I plan on making that 6 months up somewhere along the way.

  2. 2
    Daron Says:

    I am guilty of the haphazard approach, but it worked (past tense!) for me. In 2001 I bought my current house with a 30 year loan and 20% down payment. Pretty standard. Most annual bonuses and my minuscule “second job” income from that point on went to principal, as well as a nice special company cash award. In 2003 I refinanced to a 15 year mortgage, and reduced my principal by a nice sum by deciding I would not buy a car at that time. Fast forward to January 2009 and, voila, mortgage paid off with one last bonus check.

    It wasn’t a pretty process, or even very scientific, but it worked for us, and I guess what works is what works. As an extra note, using this approach, as the post mentions, put no strain on us…it was all “extra” money other than the monthly payments themselves. And while it is arguable about whether pre-paying a mortgage is a good idea, we did not lose that pre-paid money in the financial market’s implosion, the monthly financial freedom since January is great, and it just feels good.

  3. 3
    Nickel Says:

    Daron, that’s a great story. This just goes to show that there is no single “right” way. Just do whatever works for you.

  4. 4
    Ben Says:

    My effective Mortgage rate is 2.71%. I will never prepay that loan unless I sell, retire early (in 20 years), or loose the tax deduction it gives me.

    Plus the payment is less than 10% our our income, I barely even notice it’s there.

  5. 5
    LRG Says:

    It’s worth noting that making bi-weekly mortgage payments is exactly the same thing as making 1 extra monthly payment at the end of the year.

    The net principal reduction after 365 days is the same with 26 bi-weekly payments or 13 “monthly” payments.

    What this means for me…
    I make bi-weekly transfers from my checking to my savings account. My mortgage payment is withdrawn monthly from my saving account. (mortgage is with the same bank) Then at the end of each year, I will make a one time principal payment with the surplus that has built up from the bi-weekly transfers.

    This will avoid any fees for bi-weekly payment programs and allow automation on a bi-weekly basis.

  6. 6
    Wealth Pilgrim Says:

    You’ve written an excellent piece here.

    I’m a huge fan of paying off the mortgage early – in fact I did it!

    What was most helpful to me was to budget very carefully and throw as much cash as I could towards the debt.

    Now I’m mortgage free and loving it!

  7. 7
    dawn Says:

    If you have the discipline to prepay, it doesn’t always make sense to refinance.

    I’ve been prepaying from the start and am on target to pay the dang thing off in 6 more years, essentially paying off a 30-year loan in 20 years. I’m now paying an extra $425 monthly, but with a $64,000 balance, i don’t think it makes sense for me to pay the not inconsiderable refinance costs when i can achieve the same thing by prepaying and most importantly, retain the flexibility to pull back on the prepayments if, god forbid, i lost my job and were laid off. I could restart prepayments whenever i got a new job.

  8. 8
    Dave Says:

    All are good ideas, especially the “just do something” idea! I paid off two home mortgages (bought one house, paid it off in 10 years, wife fell in love with a larger home, moved, paid the new house off in 7 years) by running out an amoritization schedule and paying extra principal every month. The first years it is easy to do because most of your house payment is interest so it lops off many months at a time. After a while, I used savings to lump-sum pay out the rest of the mortgage. (Yes, you have to save money in bank accounts, mutual funds, etc. too for liquidity. This notion of either put all of your extra cash to the mortgage or none is BS. You can split the difference and do both.) An old book called “The Banker’s Secret” gave me the original idea. The author suggests nickle and diming away your mortgage. Belive me, not having to pay on a mortgage every month has given me maximum flexibility in saving for retirement, changing to a lower paying and less stressful job, and freeing up cash for travel.

  9. 9
    Matt Jabs Says:

    @Dawn: regarding refinancing, I will do so if the costs together with a better rate warrant I do so, otherwise I will not. This is of course going to be different on each individual basis.

  10. 10
    Ron Says:

    I like the haphazard approach. If you get bonuses and have a little side business, it can really knock down that principle balance quickly.

    I DO plan to refinance though, but will probably do it with a very short term loan (10 – 15 years). We’ve lived in our current home for 5 years and I have 2 more before the rate resets.

  11. 11
    Rosa Says:

    The first few years we owned our house, we had roomates, so we paid double the whole mortgage payment. It was really satisfying because, as Dave said, in the first few years every bit of principal you pay off is a *ton* of interest saved.

    Now it’s just us and we pay a little extra every month, basically just rounding up to the nice even number that’s in my budget. If we stuck with that it would turn our thirty year mortgage (now 7 years old) into a 18 year mortgage, just about.

    But we are right in the middle of a refinance for a shorter term at a lower rate. From the date that goes through, if we keep making the payment we make now, we’ll be done in about 8 years.

    It will also give us more flexibility; the required payment on the new mortgage is lower, so if something goes wrong our total overhead is lower.

    Ultimately we’d like to sell this big old house and buy or build a small, energy-efficient house – but the market hasn’t been cooperating with us right now. We’re actually looking at self-financing a teardown or an empty lot right now while they’re ridiculously cheap (there’s a very small house in our neighborhood listing at $3000 right now) and sitting on it until we can sell our house for what we paid for it or higher.

  12. 12
    Blaine Moore Says:

    I do a combination of overpay and haphazard – I never put less than $100 of overpayment towards the mortgage (~10% give or take) and usually put $200-$400 extra (sometimes up to $1000-$1200) depending upon the state of our bank account and any windfalls or how I happen to be feeling as I pay the mortgage that month.

    Got rid of our 2nd mortgage in ~3 years, and we are currently in the process of refinancing to a much lower rate right now that will really allow us to accelerate our principal payments.

  13. 13
    Chris Says:

    Great thoughts. Just make sure your mortgage company will actually apply those to the mortgage and not “bank” those funds for the next months payment. That is one of the sneaky things some mortgage companies will do.

  14. 14
    Nickel Says:

    Chris: I’ve always heard that you should make the extra payments with a separate check, and specify that it should go toward principal. While that’s a good strategy (just to be on the safe side), I’ve always made a single payment that includes the overage, and I’ve never had a problem with a lender mis-applying them. Maybe I’m just lucky.

  15. 15
    Jim Says:

    I like the method of keeping a 30 year mortgage and paying extra towards the principal every month.

    If you go to 15 year then you’re locked into paying larger payments. But with a 30 year you have the option of making extra payments as much as you want or can afford, but if you lose your job or whatever you can scale back to the smaller standard payment. So the 30 year mortgage with extra payments is the best flexibility.

  16. 16
    Kristy @ Master Your Card Says:

    Nice post! I’m always an advocate of financing for a lower term whenever possible. I’m of the opinion that when I buy a house, if the payment is too high at 15 years, I’ve got too much house and can’t afford it. That’s a personal choice and by no means something I expect of others. I just don’t want to be indentured to a house payment for 30 years. The interest I’d be paying on that loan would probably cause me some anxiety. So, my plan would be to do the 15 years and then I’d probably do what LRG posted above – move biweekly payments to a savings account and then pay one payment at the end of the year. Of course, if I sell a script and make it big with my writing career I’ll just pay cash ahead of time…but, I’ve got the 15 year plan as a back-up! ;)

  17. 17
    Manshu Says:

    I like the haphazard approach because at least its better than doing nothing and builds a sense of momentum in paying off the mortgage. Its a good thing it has also worked for others.

  18. 18
    LOL Says:

    Similar to your “Pay next month’s principal this month”, I’ve used the “Pay double the interest this month” approach (not sure if it’s been published). The side effects are that you are keenly aware of how much money you are wasting via interest payments, and also the monthly payments will be decreasing (since the interest portion will decrease rapidly).

    However, since January — I’ve abandoned this approach to hoard cash into a greater than 6 months emergency fund…

  19. 19
    One Frugal Girl Says:

    My husband and I have also used a variety of techniques. We started by adding a little extra to the principal each month, then we refinanced to a shorter term and recently started paying bi-weekly. We hope to have two mortgages for two separate homes finished off in 13 years max!

  20. 20
    T in DC Says:

    Here’s my pre-payment trick with a safety net in this economy. I send 1/12th of one extra annual payment each month to my ING account where it sits earning 1.5% interest. If I have a job loss or something, I can tap my emergency fund + the extra house payments.

    No job loss or catastrophic event comes along…I send it to the mortgage company. That way, I don’t lose the flexibility in the meantime and it still means I make 1 extra payment each year.

  21. 21
    DDFD at DivorcedDadFrugalDad Says:

    Interesting post.

    I have always rounded payments up to the nearest $50 or $100– speeds payoff at a comfortable rate.

  22. 22
    Rosa Says:

    @Jim #15 – switching to a 15 year mortgage is going to actually lower our required payments, because interest rates are so much lower now than when we first got the house and the 15 year loans have lower rates again.

  23. 23
    Swamproot Says:

    Here is another approach for some people. Some mortgage companies will allow you to do a “recast” of your amortization for a fee. My mortgage company, US Bank, will allow you to make a payment of 10% of the remaining balance and then adjust your monthly payments to reflect the lower balance against the remaining time left on the note. It costs a flat $250. Might not be too practical with a 300,000 balance, but with a balance under 100k, it would seem a reasonable thing to do.

    I was hoping to do this to lower my payment, and then keep paying the same thing. I also overpay a fixed amount (around 15%) on the same check, and it is always applied to principal.

  24. 24
    LOL Says:

    Swamproot, I’ve had car notes that would do similar to that. If you pay extra, then the balance due the next month would be less than normal (extra payments are “pre-paying” the next months bill). Interest-wise, it is a wash (you are not paying more interest if the note is amortized this way and you pay it off early).

    I wish mortgages were this same way as well — then there would be less “risk” in paying off a mortgage early. If you lose your job, your money is not “locked-up” in the house: you will have a few months (or years) of $0 non-payments to make until you ‘catch-up’ and then the normal payment schedule resumes.

    This would eliminate a large barrier (at least for me) for paying off a mortgage early.

    Unless mortgages change, it is strongly advised that you have 6-12 months in liquidity (cash or similar emergency fund) _before_ paying extra on a mortgage — depending on whether you have a two-earner (6 months) or single-earner (12 months) household. This also means that people who are buying a new home for the first time: you should also have 6-12 months in CASH on top of the down-payment you are making for the new home purchase.

  25. 25
    Seth Says:

    What about making two half-payments a month (different from one payment every two weeks)? Instead of making a single monthly payment on the 31st of each month of, say, $1000, you make a $500 payment on the 15th and a $500 payment on the 31st?

    You’re still paying $12,000 per year, but the bank sees half of that amount 15 days early, month after month.

    Does this work? It looks like it would shorten the loan considerably and reduce total interest. Or is the logic incorrect?

  26. 26
    Rosa Says:

    Seth, that’s the biweekly payment plan. It adds up to an extra payment a year. I am not sure if it makes for less interest costs, because of the way mortgage interest is done on a fixed-rate fixed-payment mortgage – i bet it depends on the bank.

    Our mortgage servicer offers the biweekly payment system if you set them up to draw directly from your bank account, and they charge a fee for that, which made me leery of it. I’m not sure what the bank would do if you just sent in the biweekly payments yourself – probably someone here does that and knows how it works.

    In the past our current mortgage servicer has done stuff like double-billed us for the same month because we paid before some arbitrary date in the month, and randomly decided that for overpayment we should be assessed a late fee, so I don’t do auto-deduct.

  27. 27
    JerryB Says:

    Countrywide (now BofA) applies extra monies to past due, escrow shortages, then principle in that order.

    When I first started I was using the haphazard method. When I refinanced to a lower fixed 30year mortgage I just kept making the same payment that I had been paying. Now that all my other debts are paid I pay at least $1k to the principle each month. My target date for having the house paid off is May 2012.

  28. 28
    Seth Says:

    Rosa,

    I’m not asking about the biweekly plan. I’m asking about paying semi-monthly, 24 (not 26) half-payments/year.

    Details in my original post, #25.

    Can anyone answer?

  29. 29
    Eden Says:

    I generally use the “overpay a fixed amount” method. I also increase the amount I pay every year to simulate the normal rent increases I would face anyway. Over the years a 3-5% annual “rent” increase really adds up and helps pay down the mortgage more quickly. Of course this would only work if your salary is increasing at a similar rate.

  30. 30
    Petunia Says:

    Seth #28 – No, that won’t result in any interest savings. Interest on your mortgage is calculated on a daily basis only in the event of payoff. Whatever your outstanding principal amount is after your payment is made, that is the amount the next month’s interest is based on. (Notice that your interest due does not vary based on how many days are in a month. If interest was calculated on a daily basis, you would notice that you owed a bit more interest on April 1 than you had on March 1, but the opposite is true.) It was strategic thinking on your part, though. :) If you were to send in $500 on the 15th, I suspect your lender would simply code it to “suspense” pending the receipt of the other $500, then apply the $1000 as usual.

    Eden #29- That is what I do, too. I have a budgeted amount which I pay, and raise it a bit each time I have a raise or eliminate a monthly expenditure.

  31. 31
    thisisbeth Says:

    Like DDFD, I read advice just before I closed on my house a week ago that rounding up was the best way to go. If you can’t round up to the nearest $100, go for $50, or even $10. Since rounding up to the nearest 10 meant adding 73 cents, I’ve decided to round up $10.73, hoping that when I get the new budget figured out (with utilities and stuff), I can keep adding $10 until I’m rounding up to the next $100. This is my goal!

  32. 32
    Corporate Barbarian Says:

    We used a combination of paying the next month’s principal and the haphazard approach when we came into extra money. I say whatever method that you use to pay it off early is a good one. Find what works for you.

  33. 33
    Dave Farquhar Says:

    I’ll second the just-do-something approach. I went in, about five years ago, with a goal to pay off my mortgage using whatever means were available. If I could only pay $200 extra per month, I did it. A couple of months I paid $2,000 extra due to some windfalls. Like others said, it wasn’t pretty but it worked: I paid my mortgage off last summer.

    One thing I found was that even small payments help. If all I could afford to overpay was $10 a month, that would have still been enough to pay my mortgage off a full month early. So every 10 bucks you can scrape up helps. Every $100 you can scrape up helps more.

  34. 34
    Bryan Says:

    Unless you have a strong emergancy account established, making extra mortgage payments can be dangerous. If you want to pay off your mortgage in 6 years, figure out what it would take each month then put that amount into an interest bearing account every month for the next six years, THEN pay the mortgage off with one big payment! This way you pay yourself first, maintaining control and access to your money for as long as possible. Life Happens in good ways and bad, at least you will always have choices by maintaining access to your money. And you will be EARNING interest for the next six years instead of SAVING interest (there’s a big difference).

  35. 35
    Eden Says:

    Bryan@34

    While I agree that a big emergency fund is important to have before making significant extra payments, saving those payments over the intended payoff period is very expensive.

    E.g. a $350,000 balance at 6%, $800 extra per month, 1% earned in a savings account. Back of the envelope, this would cost me nearly $100,000 in extra interest if I were to bank the $800 for ten years and pay off a lump sum. Yes, having access to the cash would be nice, but it doesn’t seem worth it.

    Yes, these numbers are imprecise and you could find other numbers that make more of a case for saving the money, but you would still miss out on significant interest savings.

  36. 36
    Bryan Says:

    Eden – First of all, I would hope that a 1% return is fairly short term, so we can’t use today’s savings returns for long term comparisons. Secondly, Many of the folks who have lost their homes to foreclosure in recent years were not victims of the “mortgage crisis”, they had unanticipated financial circumstances that they did not have a big emergancy fund to cover themselves while fixing the circumstance. That, if anything, is a major reason to not pay down additional principal until one has liquidity (do you know anyone who lost their job lately?). The $800 monthly principal contribution is lost until you sell or refinance the house. While the $800 monthly investment (regardless of the rate of return) is always accessible in the case of an emergancy or even an opportunity. Liquidity is key and the equity in a house is one of the worst places to keep your money, but that’s a completely different discussion. The bottom line is if you have 6 to 12 months of living expenses in a safe, accessible place, you can handle practically any financial set-back a lot better than having no extra money to continue paying for the mortgage you worked so hard to pay down.

  37. 37
    Petunia Says:

    Bryan,

    I don’t think anyone is arguing for not having an emergency fund.

    And I agree that the vast majority of those who lost their homes are not victims of the “mortgage crisis”. In fact, I believe that the vast majority are victims of their own poor planning.

  38. 38
    Bryan Says:

    Petunia -

    In comment 35, Eden wrote:

    “Yes, having access to the cash would be nice, but it doesn’t seem worth it.”

    My response was to show why it is worth it.

    As to your second point, I totally agree. This is the era of instant gratification but living as if the the money rules and practices are the same as those of our parents and grandparents. The rules have dramatically changed and not too many bothered to pay attention.
    If people do not start planning properly, what we just went through will be nothing compared to what lies ahead. I don’t like to be negative, but reality is going to kick many people quite hard when it’s too late for them to do anything about it. and the results will be people being under-insured, unable to afford health care, no or insufficient retirement funds, and outliving their retirement funds. It’ going to be a real Bang for the Boomers. I hope they at least take better care of their health because I think they’ll have to work for many more years than their parents/ grandparents.

  39. 39
    Eden Says:

    Bryan -

    I think we are more in agreement than not.

    Basically, have enough cash or equivalents (fuel, ammo, alcohol could end up as cash equivalents if things get bad enough – forget gold and other metals) to cover your emergency situations.

    Beyond that (what, $50k max), I think dividing extra savings up between looking for great deals due to deflation and getting a guaranteed 6% or so return by paying off a mortgage early is a great way to go.

  40. 40
    Kevin@OutOfYourRut Says:

    This whole thread is outstanding. So many people are in trouble on their houses/mortgages because instead of paying the loan down over time, they kept adding to it to take out the equity. A gradual paydown would have eliminated the entire mortgage mess.

    Going forward, anyone with a mortgage, or planning on having one, needs a viable plan to pay it off early. Not only will this build equity, but it will also open up more options in the future. How important is that???

  41. 41
    gloria Says:

    my mortmage balance is $89.000 and i am thinking to pay it off total, but i am not shure if this is the smart thing to do, my monthly payment is 667,70 do you have any sugestion on this and if so, what would be a better way to make profit out of the $89.000 as of today is just in a money market acct.

  42. 42
    Kevin@OutOfYourRut Says:

    Gloria, you’re looking for a yes or no answer of course, but the only answer that can be given without knowing anything about you or your circumstances is MAYBE. There are about a dozen questions that need to be answered before anyone can provide any reasonable guidance on your situation.

    You probably need to discuss this with an attorney, accountant or other trusted financial advisor, preferrably one who knows you and your situation fairly well, and doesn’t stand to benefit from your decision.

    Age, employment and income, assets, assets after loan payoff, future intentions, family situation, future cash needs, non-mortgage debt and other questions all need to be addressed before anyone can give a yea or nay opinion on the payoff, and you certainly don’t want to be sharing any of that on the web. Good luck!

  43. 43
    Bryan Says:

    Great answer Kevin! You are absolutely right.
    Gloria – the correct answer to your inquiry can only be given after someone you trust reviews your overall financial situation. If anyone tries to give you advice on what to do without thoroughly understanding the above, don’t take their advice, it’s as good as one of those Eight balls that you shake and turn over. Good Luck !

  44. 44
    Kevin@OutOfYourRut Says:

    Bryan, your answer at post #34 was equally brilliant. Liquidity is an important consideration when making extra payments on a mortgage. Once paid, the cash won’t be available for other purposes, especially now that mortgage money is harder to get than in the recent past.

  45. 45
    Bryan Says:

    “Cash is King” and Liquidity is Empowerment!!!
    I can’t say it enough….. if people managed their finances to build a proper level of liquidity, I would bet that around 70% of the foreclosures that happened over the past year and a half, would have been avoided.

  46. 46
    jj san Says:

    does anyone out there have any experience working with any of the websites promising that you can pay off your mortgage in 8-12 years and it not involve any bi-weekly or extra annual payments? jj san

  47. 47
    Bryan Says:

    jj san – You are probably hearing about one of the Money Merge Account type products. They set you up with a Line of credit from which your income is deposited to and all your bills are paid from. They also provide you with computer software to manage and monitor it. From what I’ve seen tey do work, owever you need alot of discipline to work it successfully. Some people swear by them and some hate them. I suggest you research it, look at some of the video presentations they offer and see if it is for you. The more opinions you get on this one, the more confused you will get. You have to decide based on how it fits you. By the way, many of these companies charge for the software, I’ve heard $3,000 +, but not sure. And if you can cut 22 years off your mortgage, it’s well worth it. Good Luck!

  48. 48
    Mark Says:

    I have a 40 year mortgage with a variable rate of .65% below prime. I went for this last year due to the fact that my payments were low. Most people would spend the saving, but I put it against the mortgage. Putting an extra $250 against the principle. I did this for 2 reasons. One is that if I lost my job I could stop the extra $250 and get my life back online. And the other due to the fact that I know the amount of $250 is hitting the principle. I watch my finances and I am very happy I did it this way.

  49. 49
    Bryan Says:

    Mark – Very nice!! Do you have sufficient liquid funds to cover you inthe case you lose your job? If so, you’re in great shape. Otherwise you might consider putting the $250 towards that. In 2 years, even if you stuck it in the mattress, you’d have $6,000 that you cannot access if you used it for principal paydown.

  50. 50
    Linda Says:

    We think we are getting cheated by Cit Financial on our mortgage. It said on the back of our statement that any amount made that was over the amount of the monthly payment would go to principal….we have been paying a little extra each month…nothing went to principal. When we asked about it they told us they “don’t work it that way”….anyone have a problem like this? only one time did our principal drop (we paid early) and they told us we can’t pay payments earlier than every 30 days. WHAT?

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