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Submitted by Paul Nichols on Tue, 10/13/2009 - 17:00.

Most homeowners have the misconception that the wisest method to accelerate the pay-off of their home is to simply pay extra principal payments on their mortgages. Other homeowners are lured into thinking that bi-weekly mortgage payment plans are the answer. Still other homeowners utilize a 15-year mortgage rather than a 30-year mortgage. In actuality, none of these methods usually prove to be the wisest method to accomplish a "free and clear" home.

You can accumulate sufficient cash in a conservative tax-deferred mortgage acceleration plan to pay off a home just as soon or sooner than utilizing the methods described above. In addition, you will have the following advantages:

  • Maintain flexibility, liquidity, and safety of principle by allowing the equity to grow in a separate side fund where it is accessible in case of emergency, temporary disability, or unemployment.
  • Maximize the only real tax-deductable interest allowed by tax reform by keeping the loan balance as high as possible until you have the cash accumulated to pay your hoe in a lump sum. In a typical tax bracket, you can actually pay off a $100,000 30-year mortgage in 14 years partially using $22,000 of Uncle Sam's money.
  • Maintain control of your home equity, increase its rate of return and keep the equity portable. For safety reasons, you should always keep your equity highly liquid regardless of real estate conditions.

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