All Forum Posts by: Brian Cardwell

No.  The daily interest accrual changes on the date that a payment is made.

An amortization schedule is run at the origination of the loan and it assumes that all loan payments are made on the payment due date.  This "perfect pay" amortization schedule is used to calculate the monthly payment but the application of each payment going forward to principal and interest is based on the actual dates that payments are made, not the original amortization schedule.

Take the $2k savings each month and apply it to the 1st mortgage instead (see below). Is that image correct? If so, it illustrates that the mortgage acceleration is due to saving $2k each month and applying it to the 1st mortgage and it's not due to the use of the HELOC.

I also respect that many would like maintain access to their "savings" (i.e. the equity in the property created by accelerated principal reduction). That can be done with a HELOC...but the HELOC is not required to accelerate the 1st mortgage. That's the heart of the discussion. As you said, the program works...and accelerated payment of principal takes years off the mortgage.

Let's clear up two items that have nothing to do with mortgage acceleration programs.

1. Amortizing loans and HELOCs DO NOT not use compound interest
2. Amortizing loans and HELOCs use the EXACT same simple interest calculation

$100,000 principal balance x 5% rate / 365 days = $13.6986 interest accrues each day for each type of loan until the principal is reduced.

These are the types of distractions that are used to promote these programs and they make it impossible to help members on this thread address what matters.  Please squash them.

Brian, your example above is good.  Is below an accurate image of it?

You are a smart guy and hard worker.  You have purchased a home and investment properties and have aggressively paid down debt on both.  You are way ahead of 95% of other people in the country.  I respect you and BP and that's why I continue to reply (at 4 am).

Actually I do have access to that 1300 if I need it, because my mortgage is only 1073, and I voluntarily choose whether or not I want to make an additional payment of 1300 each month.  

Eliminating the Heloc would have simplified the process, and payed off the loan roughly a half a year faster.

@Brian Cardwell that wasn't meant for you, it was just joking around based on Matthew's post. I'm sorry if you were offended. 

I looked at the spreadsheet, and used the default values, and as expected the system fails miserably.  While it DOES pay off the loan in 9.17 years, that is because you are making significant additional payments, and would have been better off without the heloc

The monthly mortgage is 1073, and the heloc payment is 1301.  So instead of paying 1073 a month for your house, you are essentially paying 2374 per month as you are now making payments on both your mortgage AND your heloc.  

If instead of taking out a heloc and instead just simply applied a 1301 additional payment each month to your mortgage, you would have had the same 2374 total payment, however you would have payed off the loan in 8.8 years.  In short, the heloc slowed you down, and it was the overpayment of additional money and not the heloc itself that caused the loan to go away faster.  The system in the spreadsheet only 'works' because the majority of people are terrible at math and don't see the many flaws in the system.