{"id":3433,"date":"2023-11-27T06:45:07","date_gmt":"2023-11-27T11:45:07","guid":{"rendered":"https:\/\/www.deeds.com\/articles\/?p=3433"},"modified":"2024-04-25T23:17:04","modified_gmt":"2024-04-26T03:17:04","slug":"does-the-tiktok-mortgage-hack-work","status":"publish","type":"post","link":"https:\/\/www.deeds.com\/articles\/does-the-tiktok-mortgage-hack-work\/","title":{"rendered":"Does the TikTok Mortgage Hack Work?"},"content":{"rendered":"\n
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Unless they\u2019re lucky enough to assume someone else\u2019s mortgage, current buyers are paying interest rates near 8%.<\/p>\n\n\n\n

The media will report on this in all kinds of ways, because people want information and they want workarounds. But sometimes, in this click-driven media world, what\u2019s packaged as news is really a distraction.<\/p>\n\n\n\n

Let\u2019s take a look at one of the latest things reporters have jumped on. It\u2019s a TikTok account that posted a \u201chack\u201d by which home buyers could cut their high mortgage rates for items they\u2019ve wanted \u2014 like new cars or vacations.<\/p>\n\n\n\n

Don\u2019t believe it.<\/p>\n\n\n\n\n\n\n\n

So, What\u2019s This Life-Changing \u201cViral Hack\u201d?<\/h2>\n\n\n\n

The \u201cviral TikTok hack,\u201d from a self-described Zillennial Finance Expert, poses a simple suggestion: rather than make monthly mortgage payments, pay every two weeks. This splits your monthly total into two installments. And this way, you speed up your monthly payments to 28 days, instead of 30 or 31. So the mortgage balance shrinks a little faster.<\/p>\n\n\n\n

OK, but can\u2019t homeowners just send in an extra payment at any time of the year? Well, yes. But Fortune Magazine <\/em>points out that \u201cSome people may find it easier to manage their finances with biweekly payments, especially if they get paid on a biweekly basis.\u201d<\/p>\n\n\n\n

Hm. But if money\u2019s so tight that the owner can only set aside mortgage money two weeks at a time, then where is the wisdom in looking for ways to \u201chack\u201d a mortgage for a new car? People making their mortgage payments paycheck to paycheck likely don\u2019t have cash set aside for important and sometimes surprising home upkeep and repair costs. A cash reserve is far more important than finding ways to get a new car or whatever a social media influencer thinks young homeowners want. And splashy purchases aren\u2019t somehow made possible by paying a mortgage a few days faster here and there.  <\/p>\n\n\n\n

Does This Mean Suggesting an Early Payoff Is Bad Advice?<\/h2>\n\n\n\n

It\u2019s not bad advice when someone suggests paying a mortgage off faster than it\u2019s due. As long as the mortgage company allows early payments and doesn\u2019t charge a penalty for making them, it\u2019s all good. Some people buy homes and do have ample funds left over, and can start paying that debt back extra fast. Homeowners who are doing well now but not so sure what the future holds in store might want to get ahead of their mortgage payoff schedules.<\/p>\n\n\n\n

Here\u2019s a real hack. Some states offer higher homestead tax exemptions for early mortgage payers. And homestead status can shield home equity from future creditors. Maybe <\/strong><\/em>The Golden Years, With a Paid-Off Mortgage<\/em><\/strong><\/a> should go viral!<\/strong><\/em><\/pre>\n\n\n\n
Fortune <\/em>says the TikTok star told viewers to \u201ccall your lender and have them apply that extra payment to the principal balance, not the interest.\u201d<\/p>\n\n\n\n
Pssstt\u2026 That\u2019s no secret. Buyers who pay extra principal can shave time off the life of the loan, so there\u2019s less interest to pay on that principal. But most buyers have already heard this from their friends, mortgage brokers, or agents.<\/p>\n\n\n\n
And to see that it\u2019s done, a borrower can simply go to their mortgage servicer\u2019s website, set up a user account, review the loan, and select \u201cprincipal\u201d or \u201cinterest\u201d to pay, right from the payment webpage.<\/p>\n\n\n\n
Note to borrowers who make payments by check: You can send in an extra amount and write APPLY TO PRINCIPAL<\/em> on the Memo line. Check writers are submitting only a manual note (rather than filling out a standard form) about how they want to pay. So, its good to call the mortgage company and make sure everything you\u2019re doing by check will work well on their end.<\/p>\n\n\n\n
OK\u2026But, Dear Fortune<\/em>, How Is This News?<\/h2>\n\n\n\n
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These days, when someone is called an \u201cinfluencer\u201d and spreads a \u201cviral hack\u201d on TikTok, is it news? At least this one tells us that (primarily young) social media audiences are getting a message. They can take control of their finances. And their real estate decisions play into that. Stimulating this kind of discussion will undoubtedly benefit some young people \u2014 even if only because they search for more information on the concept.<\/p>\n\n\n\n
When they do their own looking, they\u2019ll find that this supposed hack is something people have been doing for decades. People who had those double-digit mortgage rates of the 1980s were understandably keen to shave off some of that interest. Many did.<\/p>\n\n\n\n
But today, most homeowners have mortgages that carry 5% interest rates and lower. What great rates to have! If you already own your home, you are probably in that very comfortable situation. And your modest mortgage rate is doing more for you, right now, than any hack. Because\u2026<\/p>\n\n\n\n