Top Secret Tactic to Retire Earlier

Today I am using a guest author, Kimberly Patrick. She has great experience in the mortgage industry and has written this intriguing article. Enjoy!

The dream of owning a home is becoming very difficult for some people. Although everyone would like to have a home that is paid for free and clear, most people must acquire a mortgage that will be paid over 30 years into the future, and they make that monthly payment and that is it.But there are better ways to make your money work for you, and I am going to show you how you can benefit by "saving" your money more effectively.

Most mortgages have no pre-payment penalty clauses built into them unless it is of the sub-prime variety, in which case, your first and foremost goal should be to refinance into a conforming loan. But for today's example, we are going to focus on the "conforming loan scenario". And as I was saying, most conforming loans enable the borrower to pay more than the minimum amount of the monthly mortgage payment without any penalty.

To do this, you simply pay more to the lender than the usual mortgage payment every month. The benefit to this is that every extra dollar paid against the mortgage will lower the outstanding balance of the mortgage. This increases the equity in your home faster over time. Also, by lowering your outstanding balance, you will save on interest charges.

Here is an example based on the scenario of an average family.

If you are an average family making $50,000 per year, let us assume that you are saving, annually, at the same rate as most Americans. This rate of savings as reported by our government is about 4% of your income every year. This would mean that you are putting $2,200 in the bank every year for retirement. This breaks down to around $183 per month.

For the sake of this example, let's take this one more step and figure out what you would save after 30 years of saving $183 per month...the answer, without figuring out any interest is $65,880.

Right now, you are probably receiving at or about 1% Annual Percentage Rate in a basic savings account. And if you are depositing this into a 401k-GREAT-but it is still growing slowly. Why not take $100 of this money that you would normally save and pay down the mortgage on your home?

The following example shows why this is in your best interest. If you take out a mortgage on a house for $250,000 at a 6.5% fixed rate for 30 years, your monthly principal and interest payment would be about $1,580. Factoring in interest, after 30 years, the total amount you will have paid is...are you sitting down?... $568,870! Wow...hard to imagine.

But look what happens when you take $100 of your monthly savings and pay it towards the balance of your mortgage. When you add $100.00 to your mortgage payment every month you would save $58,863 in interest charges over the life of the mortgage! Now that is no small chunk of change!!! You would also be able to retire your mortgage about 5 years earlier...so now you have turned your 30 year mortgage into a 25 year mortgage...and it gets better.

Let's say that after the 25 years are up and you are living in your home that is PAID FREE AND CLEAR...now let's say you pretend that you still have a mortgage of $1,580 + your $100 additional payment, for a total of $1,680. Let's say you keep paying that, but now you are paying yourself! Let's say you keep doing that for the next five years...now you have a retirement account (after five years) worth $100,800! Now we're talking big bucks-and I mean big bucks in your pocket versus big bucks in "The Man's" pockets! To sum up the benefits of using this method, the borrower in the example above saved:$ 58,863 in interest on their loan

$ 24,900 in passbook savings ( $83.00 per month X 1% APR X 300 months )

$100,800 is additional savings instead of paying "The Man"

For a grand total of $184,563! Holy Mackerel...now that is a number that can get you excited! Now let's revisit the other option if the family had just paid their mortgage as agreed, and continued saving $183 per month. We already figured out the amount...$65,880. The difference is $118,683! Now THAT'S a difference! There are many ways you can use your money more powerfully, and this is one of the best ways that I know! Just imagine if you applied $200 more to your payment each month...hmmm...

About the Author...

My name is Kim Patrick, and I have worked as a Loan Officer in the mortgage industry since 1994. I have helped countless people, over the years, achieve their goal of homeownership.

I am a Financial Advisor, and regardless of whether or not my customers are first time homebuyers, or experienced homeowners, I look at their whole financial picture and make recommendations on how they can best achieve their financial goals.

My goal is to help folks who have credit "issues", as they call them in my business, find their way out of the proverbial "paper bag" and achieve the American dream of owning their own home.

If you want to read more articles like this please visit my blog a http://creditrepair4u.wordpress.com

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