Speeding through your mortgage can i apply for housing benefit

First off, the UFF site does say (in their FAQ) that this method ONLY works for people who have discretionary income each month. If you don’t have any, then it will not work. But if you don’t have any to begin with, then surely you cannot implement julie’s method either, as it requires putting in EXTRA monthly payments towards the principal.

If you look at your mortgage table that julie created in her excel spreadsheet (a big thanks there julie), you will see that most of your payment goes toward the interest. This is why it is a close-ended loan…Because you are paying the money back on a pre-calculated schedule. Whereas with a HELOC, you pay interest only on the outstanding balance for each day, you are not following some pre-established payment schedule.

For simplicity, assume we also opened up a HELOC at the same time that we established this mortgage.How can i apply for housing benefit so along with the first payment for the mortgage, we take out $5000 from the HELOC and pay it towards the principal of the mortgage. According to the spreadsheet, we now see that the total interest paid is $206,713.31. An immediate saving of $24,963.25 in interest cost for our $5000.

Let us assume you have only $500 discretionary income per month. As you can see, in this simplistic case, it will take you about 11 months to pay off the $5000 in your HELOC. $41.67/month x 11 months = $458. So it costs you $458 in interest to use that $5000 from your HELOC to save you $24,963.25 in interest in your mortgage!! WOW!

How we can cut the cost of the interest from the HELOC even more? By using it like a checking account and by using your credit card to make most of your purchases if not all. When you get your paycheck, simply move all that money into the HELOC.How can i apply for housing benefit what this will do is it will reduce the balance on the HELOC, hence, reducing the interest you have to pay. And by using your credit card to pay for your living expenses, you delay the withdrawal of that money from the HELOC. The longer that money stays in the HELOC, the more you save in interest cost.

So at the end of the month, you transfer some money out of the HELOC to your checking account and write a check to your credit card company to pay off the charges that you have incurred during the month. Keep in mind we assumed to have an extra $500/month discretionary income. Thus, you can now see that at the end of the month, your $5000 HELOC balance will now be reduced to $4500 + the interest for that month.

Lets say you get pay net $3000/month on a bi-monthly basis in the middle and the end of the month. On the 15th, you trasnfer $1500 from you checking to your HELOC account.How can i apply for housing benefit on the 26th, you transfer $2500 from the HELOC account back to your checking account to pay your credit card company. On the 31st, you get another deposit of $1500 from your employer and you then transfer that into the HELOC.

As you can see, the interest is now less than the $41.67/month as your balance did not remain constantly $5000 through out the month. And within 10-11 months, this balance will be paid off and you are ready to begin another $5000 round.

I hope from the discussion above, you can see the effectiveness of using a HELOC to pay down your mortgage faster. But you can also use this approach to pay off any debt you have, not just a mortgage. And as you can see, our HELOC, even though it is pegged at 10% interest, still yielded much less net interest cost than the mortgage interest cost!

Furthermore, you can see that you need extra discretionary income each month to make this work.How can i apply for housing benefit but the huge benefit is, you can always withdraw the money if you need it (thanks to the HELOC). Whereas if you pay extra towards your mortgage without having a HELOC, you lose access to your equity! Obviously, the more discretionary income you have the quicker you will pay off that $5000 balance and the quicker you can restart the next $5000 round.

Someone had mentioned in a previous post that you need to consider the cost of opening a HELOC. Well, find one that has no cost. Or just roll the cost into the HELOC balance and you can see it still saves you more money. Bank of america offers HELOC at no cost!

Now imagine this scenario: you have been paying an extra $500 per month towards the mortgage without using the HELOC method for 5 years. You are feeling pretty proud of yourself for such discipline. Then you get laid off and can’t find a job for a year.How can i apply for housing benefit will you be able to cope? Assume your emergency fund runs out before you land another job. Can you still cope now?

You won’t be able to draw on your equity because you failed to open up a HELOC. What’s worse, you WON’T be able to establish a HELOC now because no bank in their right mind would give you one when you have NO INCOME!!! Now you can see how beneficial the HELOC method is!

Well, the software will definitely help you monitor the progress for your mortgage pay down. It will also do any recalculation necessary in case you are not consistent in getting that discretionary $500/month. But it also maximize the use of the HELOC to help pay down the mortgage in the quickest time (at least that’s their claims).

So, to use tri’s example of $200,000 borrowed at 6% for 30 year, you pay $231,676.38 interest. My numbers will differ by a few dollars as I didn’t round.How can i apply for housing benefit if you pay an extra $500 a month, you pay off the mortgage in 179 months and pay $102,534.54 in interest. If you pay $5000 every 10 months, you do a little bit better. You pay off the mortgage in 175 months and pay $99,376.71 in interest.

If you borrow the $5000 from the HELOC and and you only have $500 a month to pay it back, that $500 has to equal the sum of the principal and the HELOC interest at the end of the month. In other words, the interest on the HELOC becomes another bill that you pay and you have a closed-end loan. So, instead of paying off the HELOC in 10 months, it’s actually 10 and a fraction that represents the HELOC interest you have paid.

I tried to reproduce what tri had done to approximate the savings in a HELOC shuffle. I assumed the effective interest rate would be 4% and that I would borrow the $5000 in the same month that the HELOC would be paid off.How can i apply for housing benefit using this adjustment, the mortgage is paid in 176 months paying 100,090.31 interest. But the HELOC took an extra 2 months to be paid off, even with the extra mortgage payment, and the total interest was about $1600. Adding it all together, the interest cost is about $101,690.

Sooooo, you savings is $102,534.54 – $101,690, about $845. WOW!! All that work… For what? I have no idea what these mortgage acceleration programs do, so perhaps the HELOC costs are excessive. BUT, they keep claiming $1,000’s of savings over do-it-yourselfers.

As I have stated in posts elsewhere, the only advantage these software packages and services give you is a way to focus on your end goal of mortgage payoff and see how every dollar spent affects that goal. If you feel that is valuable to you and that you can’t do it on your own, then paying for it would be worthwhile in the end.How can i apply for housing benefit

I think that there are so many variables that one should consider. My personal thought is that the HELOC method works because of the ability to create an interest cancellation account since you are applying your income to offset the average daily balance on your HELOC. Remember that if you had only $500 in discretionary income and applied it monthly there is a net benefit and it’s easy to calculate that effect on an amortization calculator. But the benefit of the HELOC method is that it allows you to accellerate your interest savings by giving you the ability to inject let’s say $2000 which is 4 months of your discretionary income immediately. This helps reverse the compounding interest on the first mtg aggressively. As you keep your income against the HELOC you are canceling a good portion of that interest for the $2000 float, then your discretionary income pays off the HELOC and you start over again.How can i apply for housing benefit I know that many of you are very good at calculating these numbers but this kind of makes sense to me but I haven’t put it on a spread sheet. Thanks.