Hello, Does a mortgage accelerator work for someone who is "upside down" with their mortgage? Thanks!
In short, yes. Technically it does because it speeds up the pay down on the subject property. So if the owner wants to be able to sell their home down the road for more than what they owe on the property, with a mortgage accelerator it helps pay down that debt, thus enabling the property to not be upside down.
Of course, that's subject to the numbers and how far upside down they are.
Now, having said that. There's much more to consider if you want a comprehensive answer. If you're going to pay down that mortgage on an accelerated basis - you have to ask where you're money is going and if it's wise to invest it at an increased basis - while that "asset" is depreciating.
So in essence, you are investing your money (at today's value) in something that is losing you money.
That's a great question Richard. In America one in every 5 homes is said to be "underwater" or "upside down" so you're not alone (March 2009). Home owners around the country probably have the same question.
There are many mortgage accelerator programs, some excellent and some not. But all of them have one thing in common. The value of the home has no influence on the effects of the program. All accelerator programs focus on the debt being paid down and in the case of someone "underwater" it may be the only way to get out from under a home.
If you have questions on a specific program please post a question in the forums and we'll get it answered.
Not only does mortgage acceleration work, but anyone in an upside down loan who has the capability to pay and is living within means should look into it.
The major factor to consider with an upside down loan is not that it's a real irritation that you're paying more than you would if you could refinance, but rather that their is Risk with a capital R associated with it.
If you have any negative life event, such as a drop in income or an unexpected large expense, then you can get wiped out. Calling it an upside down loan is quite appropriate. It is like having a boat capsize and you're frantically trying to right it before the next wave comes along and knocks you off it. If you are in an upside down loan, you should be doing the same thing; frantically trying to right it and get back to positive equity.
An upside down mortgage is also known as an underwater mortgage. When I first heard this term, I thought it meant something different to what upside down does. It seemed logical; upside down was when the boat had capsized but you still had a chance to right it, while underwater meant that the next big wave had knocked you off an you were drowning.
Getting to the point, take steps to build equity as quickly as possible so that you avoid drowning if anything untoward happens to your finances.