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Mortgage Cycling - Brilliant or Risky
With mortgage rates near 20-year lows, competition in the mortgage industry is fierce. It seems like every day a new mortgage loan strategy comes out that is suppose to be the best thing since sliced bread. Whether it's a mortgage with no closing costs or an interest only mortgage, everyone is claiming they can save you a ton of money. Now someone has come out with something called Mortgage Cycling. Mortgage Cycling could save you thousands of dollars or it could cost you your home.
Mortgage cycling is a program that advertises itself as a method to payoff your mortgage in 10 years or less without making biweekly mortgage payments or changing your current mortgage. Does mortgage cycling work as advertised? The answer is unequivocally yes - with a few caveats. I'm going to let you in on the secret to mortgage cycling.
Mortgage cycling is based on making huge lump sum principal payments every 6-10 months. What this means is mortgage cycling works well for those who have at least a few hundred dollars in extra cash at the end of each month. The problem is most people don't have that kind of cash available.
Mortgage Cycling relies on using a revolving Home Equity Line of Credit to make huge lump sum payments against their original mortgage principal balance. When you take out a home equity line of credit, you pay for many of the same expenses as when you financed your original mortgage such as an application fee, title search, appraisal, attorney fees, and points. You also may find most loans have large one-time upfront fees, others have closing costs, and some have continuing costs, such as annual fees. You could find yourself paying hundreds of dollars to establish a home equity line of credit. Most home equity lines of credit also carry what is known as interest rate risk.
Home equity line of credit interest rates are typically variable. The Federal Reserve is currently in the process of raising the overnight federal funds rate. As the Fed continues to raise rates, it is all but inevitable that variable interest rates for mortgages will also rise. Your savings may not be as great as anticipated.
While Mortgage Cycling does have some additional costs for most people, that is not what makes this mortgage reduction strategy risky. If you use a Home Equity Line of Credit and money gets tight, you could lose your home and the equity you have built up. Home equity lines of credit require you to use your home as collateral for the loan. This may put your home at risk if you are late or cannot make your monthly payments. And if you sell your home, most lines of credit require you to pay off your credit line at that time.
Mortgage Cycling requires you to make mortgage payments and Home Equity Line of Credit payments for up to 10 years. For most people mortgage cycling is an extremely risky way to payoff a mortgage. Mortgage cycling should be used only after a careful assessment of the risks and benefits. Prepaying your mortgage is smart. You should explore all of the mortgage reduction alternatives before choosing Mortgage Cycling as a mortgage reduction strategy.
George Burks of http://www.mybiweeklymortgagepayment.com has offered a biweekly mortgage payment plan with no enrollment fee since 1999. His interest in financial topic is varied. Visit http://www.mybiweeklymortgagepayment.com financial library for more information about a revolving Home Equity Line of Credit.
MORE RESOURCES updated Fri. July / 01 / 2022
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Refinancing slips out of fashion in Pittsburgh, while borrowing against home equity makes comeback - Pittsburgh Post-Gazette
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Today’s mortgage refinance rates: Steady shorter terms offer best savings chances | March 17, 2022 Fox Business
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New mortgage refinance programs from Fannie Mae and Freddie Mac are expanding to reach more homeowners CNBC
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Today's Mortgage, Refinance Rates: June 18, 2022 | Rates Remain High After Recent Spike - Business Insider
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The Mortgage Refinance Rush Has Cooled, But HELOCs Can Unlock Housing Wealth - Hawaii Business Magazine
The Mortgage Refinance Rush Has Cooled, But HELOCs Can Unlock Housing Wealth Hawaii Business Magazine
Today's Mortgage, Refinance Rates: June 22, 2022 | Rates Probably Won't Decrease Soon - Business Insider
Today's Mortgage, Refinance Rates: June 22, 2022 | Rates Probably Won't Decrease Soon Business Insider
Is It Too Late to Refinance Now That Mortgage Rates Are Soaring? The Motley Fool
Mortgage Refinance As An Inflation Hedge Surfky.com
Jumbo Loan Refinance Guide | 2022 Rates and Guidelines The Mortgage Reports
3.8 million homeowners would still benefit from refinancing amid rise in mortgage rates, says Black Knight - Fox Business
3.8 million homeowners would still benefit from refinancing amid rise in mortgage rates, says Black Knight Fox Business
How Long Does It Take To Refinance A House? Zing! Blog by Quicken Loans
3 Reasons to Refinance Your Mortgage Despite Rising Rates The Motley Fool
After Losing Her Home in a Fire, This Teacher Needed a Fresh Start. A Mortgage Refinance Helped Her Do It - NextAdvisor
After Losing Her Home in a Fire, This Teacher Needed a Fresh Start. A Mortgage Refinance Helped Her Do It NextAdvisor
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Home Mortgage Refinancing Disparities During the COVID-19 Pandemic: Insights for Delaware, New Jersey, and Pennsylvania - Philadelphia Fed
Home Mortgage Refinancing Disparities During the COVID-19 Pandemic: Insights for Delaware, New Jersey, and Pennsylvania Philadelphia Fed
Still time to lock in a lower rate: Today's 30-year mortgage refinance rates fall | Feb. 9, 2022 - Fox Business
Still time to lock in a lower rate: Today's 30-year mortgage refinance rates fall | Feb. 9, 2022 Fox Business
Should You Refinance Your Mortgage in 2022? The Motley Fool
Cash-In Refinance: What It Is And If It's Worth It Zing! Blog by Quicken Loans
The cost to refinance a mortgage: What to expect | Mortgage | Chase Chase News & Stories
Cash-out mortgage refinancing hits 14-year high The Real Deal
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What Do Appraisers Look for in a Mortgage Refinance? Business Insider