Mortgage acceleration

Not to be confused with Acceleration (law) or Foreclosure § Acceleration.

Mortgage acceleration is the practice of paying off a mortgage loan faster than required by terms of the mortgage agreement. As interest on mortgages is compounded, early payments diminish the period needed to pay off the mortgage, and avoid a quotient of compounded interest.

A commonplace method of mortgage acceleration is a so-called bi-weekly payment plan, in which half of the normal calendar monthly payment is made every two weeks, so that 13/12 of the yearly amount due is paid per annum. Commonplace too, is the practice of making ad hoc additional payments. The agreements associated with certain mortgages preclude or penalize early payments.

Types

Financial institutions and intermediaries offer products such as mortgage-linked checking accounts, and home equity line of credit loan facilities advertised as being capable of assisting in achieving mortgage acceleration, and available at a range of premiums.

The claim made is that by using a particular type of loan in a particular way (often following a “program”), the borrower can cut many years off the mortgage without making additional repayments – or similarly, that although additional payments are made, the savings increase significantly due to the use of a particular loan and/or strategy.

The concept usually involves a type of loan that allows the borrower to use the loan as their day-to-day transaction account. This loan may refinance the entire mortgage, be in addition to the mortgage (requiring regular transfers to the mortgage) or in some cases involves an “offset” account, that sits separately to the mortgage but offsets interest on any deposit against the mortgage interest.

Promoters

Promoters can profit from the sale of software, providing “monitoring” or “support”, or from commissions from referrals to lenders. Examples are usually presented that show huge savings on the mortgage. These examples may be based on the borrower's estimate of their regular expenditure, or on an “example” family. An underestimate of real expenditure (by the promoter or the borrower) leaves additional amounts in the mortgage (or related account) in the example, and the example therefore shows significant savings. However, the presentations represent that the savings are primarily due to the type of loan account and the way it is being used.

Further reading

• Maharaj, Neal. "Super accelerated mortgage and other loan payoff and wealth accumulation." U.S. Patent Application No. 10/955,206.
• Stolbov, Michael (2012). "Financial Accelerator Theory and the Russian Mortgage Market". Journal of the New Economic Association. 13 (1): 79–98.
• Storms, Phil (2001). "Mortgage options for retirees". Journal of Financial Planning. 14 (11): 42ff.
• Whitman, Dale A. (1992). "Mortgage Prepayment Clauses: An Economic and Legal Analysis". UCLA L. Rev. 40: 851ff.
• Compiano, Craig M. "Method and apparatus for preauthorizing electronic fund transfers without actual written authentication." U.S. Patent No. 7,440,923. 21 Oct. 2008.
• Thomsett, Michael C. (1989). Save $ on your home mortgage: mortgage acceleration techniques.
• Goodman, Jordan Elliot; Westrom, Bill (2010). "Mortgage free in five to seven years". Master Your Debt: Slash Your Monthly Payments and Become Debt Free. Wiley. pp. 73–84. ISBN 978-0-470-59585-5.
• Anosike, Benjamin O. (2000). The National Mortgage Reduction Kit: How to Cut Your Mortgage Debt in Half and Own Your Home Fast, Free and Clear Like Magic. Do-It-Yourself Legal Publishers. ISBN 978-0-932704-42-9.
• Grant, William R., et al. "Systems and methods for customizing mortgage characteristics." U.S. Patent No. 7,747,525. 29 Jun. 2010.
• Thomsett, Michael C. (1989-03-20). Saving $ On Your Home Mortgage: Mortgage Acceleration Techniques. Wiley. ISBN 978-0-471-50063-6.
• Jones, Tony G. (2004). A Homeowner's Guide to Mortgage Acceleration. Author. ISBN 978-1-4120-2738-0.
• Conyers, David Ellis (2011). Stewardship on Steroids: Increase Your Cash Flow, Build Wealth and Become a Great Christian Steward. Author. ISBN 978-1-4567-9402-6. Retrieved 30 September 2023.
• Goodman, Jordan Elliot (2011). AARP Master Your Debt: Slash Your Monthly Payments and Become Debt Free. Wiley. ISBN 978-1-118-23098-5.
• Andrew, D.R. (2008). "All the dogs are barking up the wrong tree doesn't make it the right one! : Why socking money away into IRAs and 401(k)s and paying extra principal on your mortgage is counterproductive". Missed Fortune 101: A Starter Kit to Becoming a Millionaire. Grand Central Publishing. ISBN 978-0-446-53962-3.
• Kohler, M.J.; Luebke, R. (2017). "The role of your personal residence". The Business Owner's Guide to Financial Freedom: What Wall Street Isn't Telling You. Entrepreneur Press. Do I pay off my mortgage early. ISBN 978-1-61308-375-8.
• Black, R.; Krueger, P. (2006). "Home sweet home". Getting on the MoneyTrack. Wiley. p. 41ff. ISBN 978-0-471-77993-3.
• Lush, Michael; Dutton, David (2016-04-21). Replace your mortgage: How to pay off your home in 5-7 years on your current income. Author. ISBN 978-1-5328-8044-5.