The American Dream: Paying your mortgage off early.

Dotti Berry, along with her partner, Robynne Sapp, own Harbinger Enterprises, a real estate investment group. In the guest post below, she provides food for thought about how one might choose to navigate their way through life, mortgages, and debt. As a homeowner, I understand there are a variety of options for paying my mortgage off early. For example, Jeanine and I typically make one additional lump sum payment each year in addition to the 12 that are due. We do this based on extra income earned that year with commission checks or bonuses.

Others use the bi-weekly mortgage payment program or some just make extra principal payments along with their monthly payment. Dotti uses and sells a software tool that provides a method to do this by taking advantage of an advanced line of credit (a type of HELOC).

When she asked to write a guest post, I explained my personal view was more in line with Janice here at Queercents or Trent’s post at The Simple Dollar. But the point of this site is to offer a variety of viewpoints on personal finance and I thought Dotti deserved equal time. Besides, Dotti and Robynne are the Gay Into Straight America women and they are about to depart on their next journey, Talk with America’¦ Join the Conversation. I think it’s pretty cool their financial stability has put them in a place where they can afford to take time and travel the country raising awareness about LGBT issues. Now back to the mortgage conversation. These are her words’¦

How many of you used maps in the past to help you reach your destination? If you are near my age (54), I imagine a lot of you nodding recognition. Perhaps you recall the improved days of AAA Trip Tickets guiding you to your destination? Still younger? You probably used MapQuest. If you’ve never known anything other than a GPS for easy navigation, maps probably sounds ancient, and me ‘œold.’ What did we do before GPS systems came out? I can barely stand to think of those days. Have we changed along the way? You bet we have.

Barack Obama says it’s time to change. The American people appear open to his message. Are you open to changing the way you pay off your 30 year mortgages? Did I say 30? They are becoming a relic of the past. Forty and fifty year mortgages are now being offered in both the U.S. and Canada. In fact, 50% of mortgages in Canada today are amortized over 40 years (in the past, that number was usually 25). Who would have ever dreamed? Change continues. The Canadian government recently said it would no longer back mortgages over 35 years.

Although 40/50 year mortgages initially surfaced during the high interest rates of the 80’s in the U.S., today they are a result of the rise in property prices in both Canada and the United States. They offer the only way many people can afford a monthly mortgage payment that allows them enough extra to put food on the table. That’s the good news. The bad news is that these mortgages create, not just greater long-term debt but, life-long debt. A borrower with the 50-year mortgage builds equity very slowly. In USA Today (May of 2006), mortgage experts cautioned that they are best-suited for those who plan to stay in their home for about five years, while the loan’s interest rate remains fixed.

If your desire, like mine, is to create financial freedom, it’s time to fold up the old map, and utilize a financial GPS that calculates in more complex ways. Like the GPS in your car, my financial GPS does not ask, ‘œWhere have you been?’ or ‘œHow long have you been there?’ It is proactive. Its sole mission is to get me from where I am to where I want to be. Once you begin, the system gives specific directions, taking the fastest and most efficient route as it leads you to your new destination, financial freedom.

I’m intentional about discovering new ways to be the bank, rather than letting the bank have all the fun. I ask people ‘œHow much are you earning from the equity in your home?’ They often look perplexed and reply, ‘œNothing.’ I nod my head in agreement, saying ‘œExactly’¦ZERO!’ If the banks were doing what most of us have done all of our lives, they would be fired by their board of directors. Ouch! The truth hurts, doesn’t it?

Most people realize you can make extra payments on your principal, significantly saving interest costs, and paying off your mortgage quicker. I know a biweekly program cuts 7 years from a 30 year mortgage; however, I’m a clone of 98% of Americans. I don’t do it because it means pulling cash out of my pocket. As an investor, I like to gain by utilizing OPM (other people’s money).

I’m paying off my mortgages and debt in record time without taking a penny out of my pocket. I’m not refinancing, changing my mortgage payments, or altering my spending habits. Sound too good to be true? A paradigm shift occurred once I opened my mind to think like a bank. I realized there are things I can do to cancel interest and manage my cash flow, significantly altering my path to financial freedom. It’s just math.

Did I also mention that investing at a very conservative 6% the money from years of ‘œno mortgage payment’ will make me a millionaire, rather than simply a bona fide home owner? That fits my idea of financial freedom better than simply dancing in the street at my mortgage burning party.

Not everyone was intended to be Lewis & Clark, capable of navigating their way across terrain that is difficult. Let’s face it. I need some help. America needs some help. I am not too proud to ask for it. I welcome a tool that offers a financial dashboard, and shows me the bottom line consequences of my debt and spending habits, as it adapts to my real life situations. I like a mirror I can’t ignore. I never had it before. Now I do. As a real estate investor, I research and remain open to tools for creating my financial freedom. Likewise, I have a responsibility to clients, such as those who lease option from me, to offer the best available on the market.

Feel free to use your old financial maps, paying off your mortgage the old way, month by month for 30/40/50 years. Mortgages today are front end loaded with little principal being paid in the first ten years; thus, every time you refinance or purchase a new home (5-7 years in the U.S.), you begin the interest cycle all over again. People brag about refinancing and saving ½% interest, yet the bottom line is that you pay 2-3 times the actual cost of the property. Your effective interest rate is significantly higher. Only paying off your house sooner changes that.

Personally, I didn’t want to talk about change, while continuing down the old mortgage path. I found myself saying, ‘œThere’s got to be a better way!’

‘œSlam Down Your Mortgage’ extraordinaire Kimberly Smith shares a simple analogy that concisely explains the system by first asking a question. ‘œHow many of you have charged all month long on an 18% interest credit card, and then paid it off in full when the bill came due?’ She mentions the obvious. You did not pay a penny in interest. More importantly, your ‘˜effective interest rate’ was 0%. It’s called cancelling out the bank’s interest. This concept, specifically practiced on a daily basis, delivers me stress-free to my chosen financial destination.

I am excited about a system that levels the playing field and creates equality for all people. Isn’t that what the American dream is supposed to incorporate? Carpe Diem!

More about Dotti Berry
Dotti Berry is a real estate investor, entrepreneur, and writer. Learn more about her business endeavors at Mortgage On A Diet. Robynne, her spouse, Rylee Joy (their standard poodle), and she criss-crossed the U.S. on their year-long journey, Gay Into Straight America, affectionately dubbed ‘œTwo Women and A Poodle.’ Through their non-profit Stand UP Speak OUT, they will embark in September on another journey, Talk with America’¦ Join the Conversation.

Dotti obtained her real estate license while in college in the 70’s, coached women’s basketball at the University of Kentucky in the 80’s, and turbo-charged her entrepreneurial spirit with her promotional/marketing business in the 90’s (Small Business of the Year in the United States in 1995). The new decade has a yin/yang spirit as she combines her business endeavors with her life/relationship coaching practice (GLBT coach) and the completion of her doctorate in Human Sexuality.