Let’s start with the definition of the word. Amortization comes from the English word amortisen which means to kill, from Wikipedia. Now you understand why you feel like making those mortgage payments every month is killing you! But the meaning is actually to kill the debt even though it feels like a slow death.

The mathematical model of amortization is a calculus function that looks like this:
A=P (1 + i)n / (1+i)n = P*i / 1-(1 + i) – n

Where:
• A = periodic payment amount
• P = amount of principal, net of initial payments, meaning “subtract any down-payments”
• i = periodic interest rate
• n = total number of payments

After all that tedious math what we really care about is how does it affect me?

After you have spent hours looking for your dream house with your favorite Realtor, written the contract, joyously celebrated getting it after beating our those other 3 buyers that wanted it and now you are at the closing table where it will become yours…..and the banks. You are presented with the Truth in Lending Disclosure that tells you that with that $200,000 loan on your $240,000 dream house (20% down payment, 80% financed), that you will pay the bank $231,677 in interest or 116% of the loan at 6% interest to your mortgage company after 30 years. Now we’ve all looked at this on our closing statements, even though we do our best to overlook those incredibly scary figures telling ourselves that we can afford the monthly payment so it’s really not a slow death after all!

Let’s look at the cold hard facts of amortization.

The first monthly payment breaks down like this:
Total payment is $1199.10
Principle is $199.10
and interest is $1000.

If you do the math $1000 / $1199.10, the result is 83.395%, or at the beginning of the mortgage you are paying over 83% in interest! Only at the end of the term or if it is paid off do you realize that the 6% that you were so happy to get is really 83%  amortization-graph

Another fact that most people do not realize is that the halfway mark when your payment is ½ interest to ½ principle is 21 years not 15!

As intelligent adults we really knew all of this but I’ll bet most of us never sat down and did the math to figure out the real cost. The reason I believe that most of us never did the math is because we knew that in order to have a home to call our own we had to incur the debt, (unless our name is Gates). The mortgage companies, while they have served their function and enabled us to own a home of our own, have their sleight of hand magic act to distract us from the real amount of interest we are paying. While we are watching the never ending ads on TV about “how mortgage companies compete and you win so you get the best interest rate”; they are laughing all the way to their bank while they rack up 83% interest! And in order to give you that ‘fantastic rate’ they will only charge you several thousands of dollars of closing costs to do it! There is a reason the tallest most expensive building on the block is the bank!

Well now that we have looked at the ugly truth, what do we do about it?

The shortest and simplest answer is to pay off your mortgage debt in the fastest way possible and save 83%! Keep reading for some strategies to do that.

Some of the strategies for paying down mortgage debt include: bi weekly and debt roll down. But the most sophisticated is a software based on mathematical logarithms that enable you to maximize the power of your current income and potentially pay off your mortgage in as little as 1/3 to 1/2 the time and potentially save thousands of dollars. This program is called the Money Merge Account™ System by United First Financial®.

The Homeowner’s Stability Initiative just signed into law gives a tax credit worth $8000 or 10 % of the home’s value whichever is less to first time home buyers on their 2008 or 2009 taxes.  This is great news for those potential buyers who have been on the fence about buying their first home; and keep in mind that we have terrific rates on new loans!  This is especially great news for those of us who are in an area of the country that has a fairly stable economy!  In some areas like California this may not make up for the continual falling prices but in New Mexico our prices have been fairly stable and our area recommended by many news sources as a good place to live!

If a first time home buyer has a $10,000 down payment and gets $8000 back in tax credits, that is only $2000 out of their pocket!  Sounds like an excellent deal to me!  We can either see the glass as half full or half empty.  I prefer to see the half full glass, and I’m not participating in the doom and gloom!

So how do you capitalize on the Homeowner’s Stability Initative?  Just make a commitment to do something different!  This is what changes lives; the commitment to do so!  let me know if you’d like more informatio!

The American Recovery and Reinvestment Act (ARRA) increased the maximum conforming mortgage loan limits for mortgages originated in 2009.  The increase affects 250 counties across the US.  Fannie Mae and Freddie Mac maximums will return to their late 2008 levels for these areas.  Several lookup tables are available on the Office of Federal Housing Enterprise Oversight.

Loan limits for mortgages originated in 2009 are set under the provisions of the American Recovery and Reinvestment Act of 2009.  Under that legislation, loan limits for 2009-originated loans are set at the higher of the 2008 limits and those that were originally announced for 2009 under the terms of the Housing and Economic Recovery Act of 2008.

Urgent Message from Dave Liniger of REMAX International

If you have been watching the news this week, you may have noticed that the debate in Washington has finally turned toward real stimulus for the housing industry. As a result, I believe that we could be on the brink of a substantial turn around in the real estate market. Now, it’s critical that we all join together and deliver a powerful message to our legislators that we support this stimulus.

Last night, the Lieberman/Isakson Amendment was included in the senate version of the Economic Stimulus Bill by a unanimous voice vote. This amendment would provide a Tax Credit to all home buyers at the rate of 10% of the sales price up to a limit of $15,000. The credit would be available for a one year period to all purchasers of primary residences.

Today, the senate expects to debate Amendment 353, a proposal by Senator John Ensign (R-NV) that would provide 30 year fixed financing at a rate of about 4%, for anyone purchasing a primary residence.

If these two provisions survive in the final passage of a stimulus bill they could have a tremendous impact on our industry. If they are coupled together with provisions to ease the flow of credit and reduce foreclosures, we could see an immediate and dramatic turn-around in real estate.

I feel that these provisions represent real economic stimulus. They will put money in the hands of millions of homeowners, increase sales, stabilize home values and add more revenues to local communities in the form of property taxes.

I urge each of you to contact your senators and representatives to let them know that you believe these provisions are essential components of any stimulus bill. You can go to the official Senate and House web sites to locate the email and phone number of your legislators.

This may be one of the most critical moments for the real estate industry in our time. Please pass this information on to anyone you might do business with. The outcome of this legislation will have a lasting impact on us all. I appreciate your assistance on this urgent matter.

Thank you.

Dave Liniger

From a very satisfied customer an unsolicited testimonial:

>>>>>>>>>>>>Recently, my wife and I were migrated to Version 4.1 of our Money Merge Account Software Program. How is it working for us? In one word: WOW. No, WOW doesn’t quite cut it. WOW times 1000. There, that is more accurate. In only two short weeks on the product, we have:

* Evaluated 4 different investment opportunities to find the best one.
* Taken our 28 year long mortgage down to 4.78
* Realized the impact of our “eating out” habits and reformed our ways
* Paid off over 50% of our credit card debt

These are facts! I have the proof on paper in black and white ink.

Could I have done all that on my own? Sure, but how long would it have taken me? The 4 investment opportunities alone would have kept me knee deep in excel spreadsheets for the next month or so. How long did it take with the MMA? About an hour for all 4.

Would I have been able to realize the impact of moving $4,631.50 from savings to send to my Visa card? Not a chance. I would have probably just kept making minimum payments. Or I would have just sent an extra $1,000 or so. How would my human mind have ever conceived that $4,631.50 would leave behind enough in my savings to earn maximum interest and keep me liquid, while maximizing the reduction of principal on my credit card and thus minimizing the interest that I give to my credit card company?

How could I have known that for every $50 I spend in dining out was actually costing me $71.16 in true costs? That is years and years of drowning in consumer debt that I can save myself. All of a sudden, the Olive Garden didn’t taste so sweet.

So to everyone out there that thinks they can get themselves out of debt, build true lasting wealth, and never worry about money on their own: I wish you the best of luck. For me; I sleep like a baby knowing that I will be debt free in 4.78 years, be a millionaire by age 35, retire at the ripe old age of 40.

Will I ever have to stress over a major financial decision? NO. My un-biased software will make those calls for me.
Will I ever wonder if my money is really working for me or someone else? NO. I know my money is where it will suit me best.
Will I ever miss a payment or risk damage to my credit score? NO. My software will remind me to pay all my bills. It will even do most of that work for me!

But hey….you can do this on your own. Have fun with the countless hours of spreadsheets and turmoil. I will be relaxing with my family if you change your mind.<<<<<<<<<<<<

These are the seven stages of an introduction to the  Money Merge Account® system to pay off mortgage and consumer debt to become debt free.  (From personal experience)

1)  Total disbelief; there must be something wrong with it, it sounds too good to be true, why haven’t they heard about it before or the best one is “I can do it myself”.

2)  Rhetorical questions such as:  how does it work, why can’t I do it myself, why isn’t everyone on the program?

3)  Doing an analysis when curiousity gets the best of them.

4)  The client is understandably impressed when they find out how fast they can pay off all their debt, sometimes as little as 1/3 to 1/2 the time.

5)   Fear of moving ahead with a new paradigm shift.

6) Anger at the fact that they realize now what the banks have been keeping well guarded and how easy it is to be your own bank.

After setting up their own personal Money Merge Account system

7)  Enthusiastic about the program.

8)  Starts telling everyone they know about what a great program they’ve found to get out of debt and retire early.

9)  Signs up to become an agent of United First Financial® to help others get out of debt!

“All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.” – Arthur Schopenhauer, (1788 – 1860)

News from the Feds hot off the press regarding loan limits.

The Federal Housing Finance Authority (FHFA), will announce 2009 conforming loan limits for Fannie Mae and Freddie Mac by November 7.  The limits will define the maximum loan size of mortgages that can be purchased.

Under Housing and Economic Recovery Act of 2008 , (HERA )passed July 2008, the FHFA was directed to set conforming loan limits each year for the nation as well as for high cost areas.  The rules governing how the loan limits are established differ from the rules set forth in the Economic Stimulus Act of 2008, (ESA) which applies to loans originated in 2008.  Under ESA loan limits for high cost areas were set at 125 percent of local house price medians and the maximum high cost limit was 175 percent of the nation conforming limit ($729,750 in the continental US).  Under HERA, the high cost area loan limits are 115 percent of local price medians up to a maximun of 150 percent of the national limit.  In 2009, if the national limit remains at $417,000 for one unit properties, the max limit in high cost areas would be $625,000 for the continental US.

To determine high cost area limits under HERA for 2009, FHFA will use median home values estimated by the Federal Housing Administration (FHA) of the Department of Housing and Urban Development (HUD).  The FHA median prices will be calculated in the coming weeks by FHA for the purpose of determining its 2009 loan limits.  Information can be found here.