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Slow down on mortgage acceleration program

Published: Sunday, Dec. 1, 2013 5:30 a.m.CDT

Dear Dave,

Should I pay a nominal fee to be enrolled in a mortgage accelerator program?

– Jennifer

Dear Jennifer,

No, you should not. Mortgage accelerator programs are similar to the biweekly mortgage deals floating around out there. Paying on your mortgage biweekly is fine. Paying for the privilege is not.

In the biweekly mortgage program, you make a half-payment every two weeks. By doing this, you will pay off the typical 30-year note in about 22 years. It works because there are 26 two-week periods in a year, and 26 half-payments equals 13 whole payments. It pays off your mortgage early because you’re making an extra payment every year. That’s what’s doing it. There’s nothing magical about every two weeks; it’s the fact that you’re paying extra principal.

Instead of paying your mortgage company an unnecessary “nominal fee,” just make an extra payment each year. Or, pay one-twelfth of a payment as a principal reduction with a separate check, in a separate envelope, every month. By doing that, you’ll pay off the loan just as quickly as with a biweekly arrangement.

If you’re just now taking out a mortgage and your lender can do a biweekly setup at no cost, then that’s great. Take them up on the offer. But we’re not going to pay them an additional fee so you can make extra payments on the principal. That’s just stupid.

– Dave

Dear Dave,

My husband and I tithe, but right now we’re on Baby Step 2 of your plan and we’re expecting a child in a few months. Since we’re trying to pay off all our debt except for our home, what should we do about giving beyond our tithe in this situation?

– Carrie

Dear Carrie,

Evangelical Christians recognize two types of giving in the Bible – tithes and offerings. The tithe is off the top, before you do anything else. That’s why I recommend people put it on the top line of their budget forms.

After that, offerings are almost impossible to find in Scripture until you’ve first taken care of your family. The normative method found is that offerings are to be taken out of your surplus. In my mind, while your family is in debt and you’re busy taking care of your household, there is no surplus. Just because something tugs at your heartstrings or someone spews out a toxic sermon on giving doesn’t mean that you need to give offerings above your tithe.

But here’s the good news. Once you’ve paid off your debt and have a fully loaded emergency fund in place, you’ll have the rest of your lives to open up and give like never before. Getting out of debt means you will gain control of your most powerful wealth-building tool – your income. And when that happens, you can give with extraordinary levels of generosity.

There are three things you can do with money – spend, save and give. And when you reach a point where you can give well, it’s the most fun you’ll ever have with money.

– Dave

• Dave Ramsey is America’s trusted voice on money and business. He’s written four New York Times best-selling books: “Financial Peace,” “More Than Enough,” “The Total Money Makeover” and “EntreLeadership.” “The Dave Ramsey Show” is heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.

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