Mortgage Accelerator
Banks and mortgage companies now present mortgage accelerators by offering bi-weekly payments. The mortgage (or equity) accelerator concept has been a popular program in Australia and UK for about 20 years already, while it is still fairly new to the American mortgage market. The mortgage accelerator has its advocates and opponents, being one of the most contradictory mortgage payment tools.
Mortgage accelerator is largely a bi-weekly payment plan system. According to it, half payments are made every two weeks instead of every month. It helps to pay off your mortgage earlier and reduce the total amount of interest that you have to pay. You can make more payments over a shorter period of time in order to reduce the principal faster and pay less interest over the life of the mortgage.
However, making a mortgage payment every two weeks means making a total of 26 payments a year, which is the equivalent of 13-and-a-half monthly mortgage payments a year. Some companies charge you for participating in such plans, so it is important to read the fine print and be aware of all the details before you agree to sign anything.
Using a mortgage payment acceleration account is considered the quickest way to pay off your mortgage early and pay the least amount of interest. You borrow a home equity line of credit and deposit your paycheck into the account on a monthly basis. Each month you withdraw cash for your expenses and the rest goes to pay down the mortgage debt.
In order to see how effective this or that mortgage acceleration plan is, simply compare them against a conventional, fully amortized, 30-year mortgage at average rate.
You can arrange your own mortgage acceleration program by dividing your regular payment by 12 and adding that amount to each of your normal payments. This way you will be reducing your principle faster without having to pay any extra fees.