With all the talk lately about Mortgage Cycling versus Bi-Weekly Mortgages which one is really right for you? Choosing the correct one could literally save you thousands of dollars and shave off approximately 20 years on the life of your 30 year mortgage.
So a little background on the principal of each program needs to be told. Bi-weekly mortgages became popular a few years back when interest rates were extremely high and it made a lot of sense to pay as much on the principal of your mortgage as you can in a systematic way.
The way it works is that your mortgage payments are split in two every month so you end up paying (26) 1/2 payments instead of 12 whole payments which in effect ends up paying one additional month towards your principal.
Doing this ends up saving the average homeowner thousands of dollars on the interest payments over 30 years and shaves off around 7 years of payments. Not bad for back then. But as interest rates started to drop the net effect of savings are not as great now as they were when rates were higher.
But with the discovery of a recent mortgage loophole by Craig Romero, a senior mortgage analyst, Mortgage Cycling was born. Mortgage cycling allows a homeowner to build up 10 times faster then biweekly mortgages and allows you to pay of your 30 year mortgage in 10 years or less.
Mortgage cycling allows a homeowner to build up equity in their home fast using a patent pending technique. So fast that it ends up paying off a traditional 30 year mortgage in just about 10 years.
At first I was skeptical on how powerful mortgage cycling is until I compared using a typical $150,000 loan for thirty years at 7% interest. After running the figures though the difference between a bi-weekly mortgage versus mortgage cycling is dramatic.
No matter the loan amount, interest rates or mortgage term, mortgage cycling showed to dramatically cut down the payment time and interest payments to your mortgage company over the life of the loan.
Bi-weekly Mortgage Cycling
Equity 1 year $1,520 $14,061
Equity 3 years $4,900 $44,972
Equity 5 years $8,787 $74,179
Equity 9 years $18,397 $136,429