It seems that every time interest rates rise or housing prices fall, many real estate investors and homeowners run for the hills screaming “the sky is falling the sky is falling”. However one must still realize that interest rates are still hovering as of this date, in all time low territory. There is rarely a reason to panic unless one is totally dependent upon low interest rates and their continual decline in order to survive. Of course in the real world, we realize that interest rates cannot go down for ever. They will never go below zero.

Back in my early years in the mortgage industry I can remember dealing with 9% and 10% interest rates, and I remember how excited we got when they dropped down to 8%, then 7%, 6%, and so on. Houses sold much slower then, than in today’s slower markets.

Naturally the housing market tends to move with fluctuating rates as well. Over the past 10 years we have seen record increases in house values as interest rates have declined. Another factor to consider is that low interest rates do not assure getting out of debt sooner. In fact as interest rates have declined our percentage of ownership of equity in our houses has actually declined, meaning that we have a smaller percentage of equity in our property, as a percentage of the value of that property than ever before. Low interest rates don’t mean anything in terms of debt elimination.

Now that rates have seemed to hit bottom and are rising, what’s next in the housing market?

I am not one to panic because I realize there are other issues at stake in the housing market, other than just low interest rates and a continual decline. Many of these so-called quick flip artists in the real estate investing game have now moved on to something else. However the serious long-term investors and homeowners must still continue to work in this environment. The good news is there are many good options for real estate financing, and some very creative ways in which one can significantly reduce the cost of interest even if rates are higher. Let me say that again, reduce the cost of interest rates even if rates are higher.

I’ve been in the real estate investment and mortgage business for over 17 years, and I have seen just about everything there is to see in terms of trends and changes in this industry. Nothing is more dramatic than one of the strategies I will show you here.

First let me review the different types of mortgage products and strategies out there that are used to reduce mortgage expenses.

The extra payment option. The obvious way to reduce the long-term cost of a mortgage is to reduce the balance quicker, thereby saving interest over the long term. I strongly encourage anyone to at least consider this option when looking for ways to reduce the cost of a mortgage over a period of time. This can be done regardless of interest rates. This is also an important strategy to consider if you are concerned about possible declining housing markets. If you reduce the cost of your mortgage, you reduce the cost of your house, and minimize your risk should the market turned down a bit. The downside to this approach is it takes extra money out of your monthly budget in order to accomplish it. The other disadvantage is that it is not nearly as effective as the strategy I will show you below, with about the same dollars in your budget or less.

Bi Weekly Payments. This is nothing more than a way to make one extra payment per year. The average consumer is duped into thinking that by paying every two weeks you will save a lot of money. Yes you will save some money, but most of these services charge you extra fees to establish and operate them. Just make the extra payment than, if this is all you have in mind. But once again it is not nearly as efficient as using the same dollars with the more advanced strategies. On a $200,000 mortgage at 7%, after 7 years you will still owe $165,218.

15 year mortgages. This is certainly a way to reduce your costs of a mortgage over the life of a mortgage. The only significant downside is that you will spend a lot more money out of your monthly budget to accomplish this, and you have very little flexibility if you need additional cash flow. On a $200,000 mortgage at 7%, after 7 years you will still owe $118,806.

Interest only loans. This type of loan product has become very popular in recent years because it offers a low interest rate, and low payments. There’s nothing wrong with that except the trade-off is that you will be paying zero toward your principal and therefore be stuck in an indefinite mortgage. My general philosophy is to get out of the mortgage as early as possible no matter what the perceived tax benefits. You pay for those benefits in terms of the national debt which has to be paid back later. Does it make sense to pay out three dollars in interest in order to get one dollar back? If you were a business, how long could that last?

Negative Amortization Loans. These mortgages have become very popular in recent years, especially in high dollar markets such as California or other coastal states. In this type of mortgage one pays a payment as low as 1.99% - 2.99%, yet at the same time your actual rate may be in the range of 6% or 7%. Therefore the entire unpaid portion of your payments gets stacked onto the mortgage balance and then compounded on top of that. I call these “nuclear bombs” and have warned investors to avoid these for several year. Now the truth about these instruments is out, as today’s housing market goes through so much turmoil. If one is not very sophisticated with mortgages or has a very creative plan as to how to use it, I believe they have no business with this product. In most cases people pay less than the amount actually due and therefore the mortgage balance rises over time, and compounds on top of that. Use this mortgage plan very carefully.

HELOC/Home Equity Lines of Credit as a Mortgage Payoff Plans. These programs sound similar to the Living Free and Clear ™ strategy but are far more risky, as you are asked to payoff and refinance all of you current mortgages into a new First Mortgage - Home Equity line of credit. It is just another way for the mortgage industry to trick folks into another risky, high cost mortgage. The risks are…these plans take longer, and may not work at all of that variable rate mortgage, making up 100% of you balance, goes up in interest rate by about 2% or more (which is highly likely). They simply implode.

There are basically 3 ways to obtain an accelerated payoff of a mortgage

1. Make extra payments or bi-weekly payments, which may in 5 to 7 years, unless you dump a whole lot more cash into it.
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2. Get a lower interest rate. Let face it, we have had the lowest rates in years, and people are falling further behind. Add to that to risks created by a commission driven mortgage industry who got a lot of people into bad mortgage products.
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3. Lower your average daily balance. For example, if you carried a $5,000 lower average balance on your credit cards throughout the month, you pay a lot less interest. This happens regardless of the interest rate of the card. The Living Free and Clear ™ system perform over 1200 pages of computations and puts out a simple plan where you can do this with your mortgage, yet I just takes minutes to set up, and few minutes to update and track. It is then as simple as using a credit card, writing checks, and making a deposit or two each month…once you have the plan and support in place.

Living Free and Clear: Flex Line Mortgage Elimination Strategy

(Get details at: www.livingfreeandclear.com ). With this powerful system we trademarked, we teach people how to reduce the cost of their mortgage while living on the same monthly cash flow, while also living the same lifestyle and owning the same items and luxuries they are used to. The risk is low because you may be able to do it with your current fixed rate mortgage, or at least set yourself up with a fixed rate mortgage for about 90% of the outstanding balance, thus virtually eliminating variable rate risk. A small 2^nd mortgage or line of credit ma make up about 10% of your entire balance, which is on a variable rate (all lines of credit are variable), while the other 90% or your mortgage is fixed. Even the small line of credit went very high in rate, it has very little effect on the result.

This takes very little sacrifice and once established is about as simple as making deposits and writing checks, but with a slightly different plan as to what goes where and when. It is very easy to establish and maintain. In our strategy we teach people to establish the proper type of mortgage, a very unique form of a mortgage in fact, which allow an individual to manage their cash flow just like a bank account, except that all of your monthly cash gets applied to your mortgage balance before you pay all the rest of your bills. The result is a lower “average daily balance” on your mortgage over time. Yet you have full flexibility to spend out of this account as needed for everyday expenses, just like a bank account. It does take some powerful software to set up, project results and track changes as you go however. But the user experience is simple.

By the way with a typical $200,000 mortgage, in as little as 7 years, you could actually be free and clear, while living in the same house, and having the same spend-able after debt cash to live on. (Results will vary).

It is similar to earning 6% to 8% on your money in a savings account over time, versus 1% to 3%. It is also similar to reducing a current 7% mortgage to about 2%, effective rate without refinancing. These numbers may seem small but when applied properly it can easily reduce a mortgage payoff to about one third the average payout time. Factors such as excess cash flow, extra income, and simply following the plan are keys to success. A power yet simple to use software program helps set up the plan so that one can determine their own strategy and better stick to it.

Let’s face it if one could knock 20 years off a 30 year mortgage and their payment is $1,500 a month, that equals 240 payments times $1,500 = $360,000 in payments saved. That’s real money that could be used for other investments, college funding, other debt elimination, or simply peace of mind. All while living the exact same lifestyle.

On investor properties, keep in mind, it works slightly differently, but investors report an average $50,000 projected savings per property, with our advanced strategy.

That is equivalent to a $50,000 additional profit per property!

Now that you have an idea of the available options to reduce your debts, you can learn more by visiting www.livingfreeandclear.com to find out more about the services of this company.

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About the author…T.J.’s Bio:

Over the past 17 years T.J. Marrs has participated in over 500 real estate transactions combined as a licensed Real Estate Agent, Oregon & Washington licensed Mortgage Broker & Mortgage Banker, and real estate investor. T.J. has also held professional certifications in securities, insurance, and is a decorated U.S. Naval Intelligence Officer serving during the Iran-Iraq War and cold war periods.

Since surviving a near fatal multiple stabbing attack in a Church parking lot, while parking a car to attend midnight Christmas mass in 1998, T.J. has dedicated his life to helping others overcome their fears and obstacles, and changing their lives.

T. J. has authored two books and multiple courses on real estate investing and finance, and has developed one of the most successful coaching systems in America. He currently serves as Chairman of Northwest Real Estate Investors Association, one of the most successful associations in the country. He now spends his time dedicated to his real estate investments, speaking internationally, and helping his students succeed in their businesses. He is the select author for one of the internet’s top web sites receiving over 2 million hits per month.

T.J. has twice been interviewed by the Wall Street Journal and CNBC’s Power Lunch. He has also contributed to the new books “The Idiots Guide to Foreclosure Investing”.

His newest book is “Foreclosure Profit Machine” and is currently available on www.amazon.com. His latest project includes his advanced mortgage acceleration strategies, with the goal to make One Million homeowners debt free, in the next 5 years.

T.J. motto is “Helping people succeed, one person at a time”.
T.J. invites everyone to try his free success newsletter available at:
www.tjmarrs.com