Replace your mortgage with a HELOC

[Josh Saul]

Hey Folks,

I've been looking into the concept of replacing our home mortgage with a fixed rate HELOC as described on sites like Replaceyourmortgage.com. They want about $2000-2500 for their coaching and information. It seems like a good idea in a lot of ways but curious if anyone out there has done this and how it went. Thanks for any advice. This is clearly a big decision because if you replace your mortgage you can't get the same one back!

Thanks,

Josh

[Don Konipol]

@Josh Saul, you really should try to get a basic understanding of the principals of compound interest and time value of money.  in an amortized loan you pay interest on the amount owing at the time of each payment.  since more principal is owed at the beginning of a fully amortized mortgage you pay more interest at the beginning.  since less principal is owed at the end you pay less interest.  This means as time goes on more of the payment goes to principal, which is the feature that allows the entire loan to be paid off in a given amount of time with equal monthly payments.

Before fully amortized mortgages became available, the home buyer had two options.  one was to get a 5 year interest only loan, with the result that the entire loan was due in a lump sum in 5 years and no principal had been paid down.  The other option was to get a ten year loan where each payment paid a fixed amount of principal plus interest.  This resulted in much higher payment amounts early in the mortgage, with payments unaffordable to most people.

The advent of the 30 year fixed rate mortgage in the United States has made home ownership possible for a percentage of the population unheard off in any other country.  it has also led to the establishment of a liquid market for homes, allowing people to move up or down the size ladder and change locations as needed.  in countries without an established mortgage access people tend to either rent all their live or stay in a family home forever whether they'd like to move or not.

To those of us who remember 13 and 14 percent mortgages, your complaints sound like not only from someone who does not understand interest, but also someone who has no understanding of how economy really works and thinks he is 'owed' his 'rights'.  Its probably not your fault, you grew up in an era of participation trophies and taught by socialist academics who believe government regulation is the answer to every problem.  in any case no one will ever force you to get 'ripped off' by the evil financial manipulator, you still have many choices.  You can pay cash for a house; see if one of your left wing professors will lend you the money under terms more beneficial to yourself, of you can move to one of the few remaining countries more closely aligned with your economic philosophy, Cuba or North Korea.