Mortgage cycling is a repayment strategy that can repay your mortgage in as little as ten years. This program involves making large equity payments every six months; if you don’t have the cash on had to do this, there is a way to use home equity loans to cycle the payments. Here is what you need to know about mortgage cycling.
Mortgage cycling is based on making large equity payments at least twice a year. If you do not have the cash on hand but can save up at least five thousand dollars every six months, a home equity line of credit will allow you to successfully use this strategy.
By making large lump sum payments in addition to your regular monthly mortgage payment, you are changing the amount of interest due after each equity infusion. The interest due for any given month is calculated based on the remaining principal mortgage balance. When you make large equity payments you reduce the principal balance used to calculate how much of your mortgage payment is applied to interest. A side benefit of the reduced amount paid to interest is that more of your monthly mortgage payment is applied to the principal balance. This cycle reduces the interest further.
Mortgage cycling is an excellent repayment strategy that does not rely on gimmicks. There are risks and expenses if you are using home equity loans to make the equity payments; if you fall behind on the payments on the home equity loan your lender could take your home. You need to fully repay the home equity loan every six months; if you are unable to pay this back in time for the next equity payment, you are effectively negating the benefits of cycling with finance charges from your home equity loan. To learn more about mortgage loans and mortgage refinancing, register for a free mortgage guidebook using the links below.
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Louie Latour specializes in showing homeowners how to avoid common mortgage mistakes and predatory lenders. For a free copy of "Mortgage Refinancing: What You Need to Know," which teaches strategies to find the best mortgage and save thousands of dollars in the process, visit Refiadvisor.com.
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