How Mortgage Acceleration Works:

Weekly, bi-weekly or monthly payment plans? If you can manage it, and if your mortgage company or bank allows it, I recommend you pay your home loan payment weekly. This simple debt reduction tactic can save you a lot of money over the life of the loan. Here’s how:

To simplify things, let’s say your monthly home loan payment is $100. Lucky you, right? So you are paying $1,200 a year.

$100 x 12 months = $1,200

Rather than paying $100 monthly, you start paying $25 weekly. It’s the same thing, right? Now you are sending 52 payments of $25 which adds up to $1,300 a year.

$25 x 52 weeks = $1,300

So now you have sent an extra payment every year, which goes toward the principle, simply by changing ‘when’ you pay, not how much. Actually you are paying more but you just don’t feel it. There’s something like 4.3 weeks in a month, not 4 week in a month. Mortgage acceleration lets you take advantage of that extra time.

My Personal Example:

Using my personal example, you can see that by making weekly payments and sending a little over $350/month extra toward the principle my 30 year traditional mortgage will pay off in fifteen years (only 12 years to go). Using this tactic, I will save close to $100,000 during the life of the loan. It would take a lot of grocery store coupon clipping to save that kind of cash!

Side Note: My monthly home loan payment just dropped by $130/month because my home lost market value – Hooray! I’ll still continue with the same weekly payments and we should be completely debt free, including the house, before this blog post is eight years old. Man this stuff is FUN!

The First Step:

Check with the financial institution servicing your home loan and ask about a mortgage acceleration program. These programs go by many names but you generally have to ask. Other names include interest reduction plans, equity accelerator (for Chase Bank), or mortgage reduction programs.

Don’t Stop At Basic Mortgage Acceleration:

Now that you have the ball rolling, and once you have a REAL emergency fund established, start dumping extra principle payments into your loan (DO NOT interrupt your debt free plan to do this). It’s amazing how quickly you can pay off your home with a little planning and when you get proactive.

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The Federal Trade Commission’s (FTC) Debt Collection FAQs: A Guide for Consumers clearly outlines your right to send a written request to stop credit harassment.

1. Make a copy of your letter.
2. Send the original by certified mail.
3. Pay for a “return receipt” to document the collector received the letter.

It’s a bad idea to leave the creditor with no form of contact at all. This may pressure them into taking legal action if they suspect you will not pay. I recommend allowing contact via postal mail and/or email. The Cease and Desist sample letter provided below reflects as such.

Note:

• Cease and Desist letters to a debt collector you owe money to do not void the debt you owe.
• The creditor or the debt collector can still sue you to collect the debt.
• The creditor or the debt collector may still contact you to inform you that they have filed suit or other proceedings.

Sample Cease and Desist Letter

Bonus: Downloadable Cease and Desist Letter Samples

Cease and Desist

(Date)
(Name(s) on the credit account)
(Your Address)

(Creditor/Company name)
(Account #)

To Whom It Mat Concern:

Due to circumstances beyond my control I have fallen behind on my monthly payment. Your collection attempts and daily phone calls have become a form of harassment and must stop immediately.

You have blatantly and repeatedly violated the Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from using abusive, unfair, or deceptive practices to collect debt. Daily phone calls are unacceptable and further harassment will be reported to the FTC.

Accordingly, under 15 U.S.C. Sec. 1692c of the Fair Debt Collection Practices Act, this is my formal written notice to you to Cease And Desist all further communications by phone. I also request you not contact my employer or any other third party regarding my overdue account. You may contact me by email or postal mail only.

I fully intend to pay this dept and I will give this matter my upmost attention but it will take a little time. I regret it came to this and I assure you I will not use this development to avoid my obligation and will catch up as soon as possible.

Sincerely,

(Signature)

(Printed Full Name)
(Full Postal Address)
(Your Email Address)

While the credit settlement approach will stop further late fees and interest, your credit will take a hit from debt arbitration that results in a reduced settlement even though the creditor agrees to the new terms. Honestly, however, credit rating is not a huge factor for those in the situation requiring this type of extreme action.

Is It Necessary
When you get behind on credit card bills and other debt the credit collectors can be ruthless. Most collection agencies break the law with their attempts to collect debt. If your reason to settle with a creditor rather than pay when you can is simply to get them off your back then you might consider a cease and desist letter. You can stop those harassing phone calls and threats. You can legally forbid them to call you by providing some other form of contact such as email or postal mail. This can give you a break while you get the debt under control. It doesn’t stop them from taking further legal action but it will stop the harassing phone calls.

Be Careful
I have nothing good to say about debt collection departments, especially collection agencies. Never believe a debt collector at their word. Get everything in writing. If it’s not in writing, it didn’t happen. And NEVER NEVER NEVER give them access to your personal or business bank account. NEVER sign an agreement to allow funds to come directly from your bank account and NEVER give your back account number or routing number to a collection agency. These low lives will clean you out.

If it turns out that the only way the debt collector will work with you is to have electronic access to your checking account you can still make the deal. You will need to setup a separate and FREE checking account and only keep enough money in that account to cover the agreed payments. Make sure you have opted out of your bank’s bounce protection and overdraft protection program on this separate bank account so the creditor isn’t overpaid at your expense.

True Clear Debt Solutions
The best clear debt solutions advice I can give when it comes to out of control debt is to get it under control. I know it sounds easier said than done but it is almost always possible. It may not be the easiest clear debt solution but in most cases it is the best solution. I’m a big fan of Dave Ramsey’s Debt Snowball Plan.

If you don’t want to do it alone and need help getting your debt paid down look into a credit counseling service. I recommend you find a nonprofit debt counseling or non-profit debt management program. There is no need to pay someone to pay your bills. This almost always turns out in disaster.