There Is No Mortgage Trick

January 27, 2016 No Comments »
There Is No Mortgage Trick

Over the years, I’ve seen tons of ads and articles about a so-called “mortgage trick,” only to click on the associated hyperlink and see nothing regarding any tricks.

For the record, I’m always interested to see what someone might have up their sleeve, which is why I continue to click year after year, hoping there really will be a trick one of these days.

Instead, I repeat the same mistake over and over again, expecting a different result, which some liken to insanity. I’m okay with that, I’ll swallow my pride.

You may have seen these same ads or articles claiming to save you thousands or more on your mortgage by “using this one trick,” only to be left disappointed or scratching your head.

When it comes down to it, there’s no trick. A trick is defined as “a cunning or skillful act or scheme intended to deceive or outwit someone,” per Google.

Or one that mystifies the audience – think the quintessential magician pulling the rabbit out of the hat, or making a dove appear out of nowhere.

Do you really think mortgages are like magic, or anywhere close to it? And they entertaining or even the least bit interesting? Not really, even though I try to make them slightly more appealing on this blog.

A mortgage is simply a loan on your home that requires regular payments for a set period of time, usually a long 30 years.

There’s no magic trick to change that unless you’ve got more money or can simply avoid a mortgage altogether and pay in cash.

So What Is the Trick?

The supposed trick most of these ads tout is a simple refinance. And they’re offered at just about any bank, credit union, or lender you’ll come across.

You don’t have to ask around about them, or know someone on the inside to get one. They’re readily available as long as you qualify.

While a refinance could save you tons of money, even hundreds of thousands of dollars depending on the situation, it’s not a trick.

It’s just a financial move to reduce your interest rate or shorten your loan term so you’ll pay less interest. It can be a great move and one that changes your life, but it’s still not artifice or a clever ploy.

A refinance isn’t a scheme nor is it intended to deceive or outwit. It’s just an option you have as a homeowner to take advantage of the dynamic interest rate environment.

[The refinance rule of thumb.]

The other common “trick” has to do with biweekly mortgage payments. Again, not a trick, just another option to pay the mortgage a little bit faster while reducing your interest expense.

Why Call It a Trick?

I suppose it just sounds a lot more enticing to refer to it as a trick rather than a boring old refinance, like you are pulling one over on your bank or being let in on a secret. Take that “The Man!”

At the end of the day, if you want to own your home free and clear you need to pay your mortgage in full. You can do this in a variety of different ways.

You can slowly pay your mortgage back over 30 years and never refinance, even if interest rates fall dramatically. Or you can keep an eye on rates and refinance if and when it makes sense to do.

To avoid resetting the clock, you can also go with a shorter loan term when you refinance to stay on track and avoid taking your mortgage into retirement with you.

This could be quite wise, and as mentioned, save you tens if not hundreds of thousands of dollars. Trick, no? Smart financial move? Quite possibly.

At the end of the day, there is no silver bullet to your mortgage problem. Yes, you can pay off your mortgage a lot faster and for much less money, but it’s not magic, just common sense.

(photo: Steven Depolo)

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