does anyone know how a accelerated home loan mortgage work?

Question

I was told that I have everything put into my bank account and as my direct deposit is deposited it will reduce the principal thus making the interest lower

Answer 1

Instead of making a payment monthly, some plans will set it up to pull 1/2 of your payment every other week. What does this do for you- instead of paying interest for your normal monthly payment the interest gets reduce because the bi-monthly payment hit a portion of your principal. This lowers the amount that you have for principal on the loan. Also, if you are paying monthly there are 12 payments per year- on a bi-weekly program the payments add up to 26 per year, or 13 months worth. You get an extra payment in. This also lowers your interest.

As for the interest reduction part, some banks will offer you a lower rate because you have agreed to allow the to use the ACH function. Basically they can pull the funds and not have to wait on a check clearing. It's automatic.

Answer 2

speeded-up amortization. Ask for a amortization schedule from your mortgage company. If you make extra principal payments, then you do not pay the interest for the extra payments. You ending up paying a lot less in the long run and you pay off your loan much faster. It is easier to understand if you are looking at a schedule.