Three Warnings About Mortgage Early Payoff Schemes

Several vendors have recently announced programs to help people pay off their homes early. You might ask, "How many ways are there to do that?" There are a few. But when lenders obfuscate the terminology so that the tools they recommend seem exclusive to them, there seem to be more, and comparing services becomes difficult.

Here are the questions to ask before entering into any of these programs.

1) How much does the program itself cost, that is, the information and whatever the vendor requires you purchase with that package?

• For example, is the vendor selling information only?
  
  
• Is the vendor selling you a loan package or financial restructuring you must purchase in order to realize the savings?
  
  
• Is it a one-time cost, or are there monthly or annual charges?
  
  
• If there are other instruments to purchase, such as equity lines, can you shop around or are you locked in?
  
  

For one such program, the cost is $3500. If you did nothing other than pay $3500 on the principal--assuming $250,000 mortgage at 6.5% and you make this payment approximately a year into the loan--that $3500 cash infusion to principal would save you $20,500 over a regular 30-yr mortgage. Or would you rather spend $3500 on a program that tells you how to save $20,000 or more?

2) Is there software involved in the program?

• Do you buy and own the software or must you rent or lease it from the company website?
  
  
• Are you the kind of person who enjoys entering figures into software, or are willing to type in your data? How often must that be done? Can you enter lump sums, such as "$4000/mo expenses," or must you itemize each bill?
  
  
• If you quit using the software, can you continue to pay off your mortgage early?
  
  
• If you continue using the software, what is the "lifetime" cost of the software, that is, the monthly charge times the number of months and years you plan to be in the program?
  
  

In one case, the first year's use of online software (pictured in a box, as though it is something you get, but you don't) is $499. Renewals are $199. If you follow a normal 10-year pay-off scenario, the software will cost you $2290, besides educational materials or any loan-related costs. Software can help you see how your early payoff is working. It can also help you manage your money. But that is nothing you cannot do with a spreadsheet, some of the calculators available online, or with a pencil and paper.

If you simply want to know how soon you could pay off your home using the most ambitious of all these techniques, that is, using the paid-for portion of your home to fund the unpaid-for portion, check out the calculator at letyourmortgagemakeyourich.com/calculator.php.

3) Is there a large commission if you turn around and sell the program to others? Some programs offer as much as $1000 per sale. If you enjoy sales and enjoy the company's presentation, you could turn this into a part-time job. If you want a part-time job, consider where you will get leads and how many hours a week you would like to spend marketing the program. Or did you just want to pay off your own loan quickly?

Think of your friends. Would you enjoy asking them to pay $1000 more than the non-commissioned cost of the program? Or would you rather they put their $1000 onto their mortgage principal?

These seem to be the prime characteristics of early payoff programs that should be compared first. When you find several that compare apples to apples, then you can go deeper into the fine print to see what each offers.

And you can sign up for my soon-to-be-released FREE report on easy ways to pay off your home years sooner, and save thousands--or tens of thousands--of dollars in interest. Three methods are enumerated right there on the page, but when the 10-page report is emailed to you when it's complete, it will knock your socks off!