With the present economical downturn we are experiencing, we find ourselves to ensure that we make the best use possible of the money we make. In order to do so, many of us need to shift the way we think about our finances and how we can change our financial habits to make optimal use of every dollar we make.

For instances, most of us are ok with keeping most of our money in a savings or checking account where we get a very small return. In this example, the banks are the ones is using our money to make themselves richer.

Another typical example is the traditional mortgage. In a typical 30 year home mortgage, it’s not until the 20 years and 2 months mark that we make the same amount toward our principal that we do toward the interest.

If we take into consideration that the average American stays in their home for 5 to 7 years, they hardly make a dent in the principal of their home mortgage. In other words, the structure of the mortgage greatly favors banks because almost all of your initial monthly payments go toward paying the interest portion.

For over twenty years, people in countries like Australia, the U.K. and Canada have used mortgage accelerator programs to pay off their homes in 10-15 years saving an average of $150,000 on their mortgages. This type of programs is now available in the U.S.

A mortgage accelerator program works without making additional payments toward the mortgage. It works in 4 simple steps:

1. At the beginning of the month, a piece of software will tell you the optimal amount to pay to your 1st mortgage to ensure you are paying as little interest as possible. The money for this payment will come from an advance line of credit (HELOC.) This transaction reduces the debt in the 1st mortgage and moves you further down the amortization schedule.

2. You then deposit your monthly income in the HELOC decreasing the balance on the HELOC. When you do this, you have your money working against your debt in the HELOC by saving on the interest you’ll be charged.

3. You charge all of your daily expenses on a credit card to allow money to sit in the HELOC for as long as possible.

4. At the end of the month, you pay off the credit card before creating any interest charges from your credit card.

By following these simple steps, you start making sure that the bank’s money is working in your favor and no the other way around. Using other people’s money (the bank’s) is one of the fastest way to become financially sound.

Although it make take a while to get use to the changes, you can think of the other alternative; After all, how much effort and time would it take you to make the money you would save if you could pay off your home mortgage in 10 years?

This entry was posted on Wednesday, June 11th, 2008 at 4:53 am and is filed under Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.