Most houses cost between 2 to 3 times what they list for. Why? Because over 15 to 30 years you'll be paying all that interest to your mortgage company. You can reduce that considerably with home equity accelerator programs.

Most of us think that cost of the house is the list price. Some of our more informed readers will include settlement costs and maintenance in the cost of a home. These are all valid and would make total sense if we were buying the house for cash. More often than not, we won't be doing that.

We'll have to take out a mortgage and be paying it off a 15 to 30 year period. Alright, I can hear you now. You’re not going to be in that house for 15 years let alone 30. So what! You will buy another house or houses over your life time and have other mortgages. Same result, the banks are getting rich off of you and your real net worth is fiction.

The Real Cost of that House
The US government goes out of its way to require all mortgage lenders to show you what the loan is really going to cost in terms of the annual percentage rate (APR). The APR is always going to be higher since it includes interest, loan origination fee and points. So at the Settlement, your 7.5 percent loan will have an APR of 7.958 percent. That's not bad at all.

Forget about the APR. The real shocker is the other fine print on your Settlement sheet or APR statement. If you are a home owner, dig this paper out of your settlement documents. In my case, that home that I bought listed for $215,000 and had a $180,000 loan. I'll be paying $495,768 over a 30 year period. That is 2.75 times the $180,000 that I borrowed. I will be a lot poorer in as a result.

Yikes, that a lot of money. How come? I only borrowed $180,000 so how did I end up paying a total of $495,768? Real simple. You have to pay interest and as any Amortization Table will show you, when you make a mortgage payment, your early year payments are made up of mostly interest. Banks and savings and loans make their money over time.

How can I get some of that cash back?
There are several cost-free ways to reduce your cash outlay all by paying off the mortgage faster. Here's how it's done:

1. Send the lender an extra $100 each month or take that income tax refund and apply it all to the mortgage principal,
2. Make that January payment at the very end of December, and
3. Enroll in an automatic payment plan with your mortgage company. Ask if they will also allow you to designate extra principal in the payment. This doesn't cost anything and you gain piece of mind that the mortgage payment is timely.

Enroll into an Equity Acceleration Program
Several companies like Wells Fargo Enhancement Program and PayMap offer these programs. They charge a one time enrollment fee, but it is worth it. You make your normal mortgage payment by paying half of your payment twice per month. This is all done automatically through your checking account. So in the reality you pay no more than you do now.

Normal vs Biweekly Payments with Equity Accelerator

Here's an example of how it works on house that lists for $1 million courtesy of PayMap. The house lists for:

List Price $1,000,000
30 year fix rate loan of 6%
10% or $100,000 down paymenty

1. Normal Monthly Payment = $5,688.61 vs two automatic payments of $2,844.31 each month. Simplified Budgeting and total payment has not changed.
2. Normally payoff loan in 30 years, but do it in 24 years, 4 months instead.
3. Your equity in 10 years normally is $137,014, but with an equity accelerator program it's $212,519.
4. Total Interest Savings with equity accelerator is $255,523.