Mortgage Cycling can be a very powerful vehicle to build wealth. Once you get the hang of this cycling technique and you feel comfortable using credit to pay down your mortgage, you can focus on using mortgage cycling to create an income.

Since Mortgage Cycling is so effective at rapidly building tens of thousands of dollars in home equity, you can use this to your advantage by taking this equity and placing a down payment on an investment property. A good example of an investment property would be one that is purchased at or below market value then turned into a rental.

You would then use the renters’ monthly payment to make the mortgage payment on this rental property and possibly the payment on the equity loan you took out to purchase the property. This way you have acquired this property with no out-of-pocket expense.

Now you obtain a line of credit to begin Mortgage Cycling this property. Before you know it, you will own your first investment property – free and clear. You can either sell it for a profit or keep it and collect a regular monthly payment from the tenant.

From there, you can always move on to additional properties using this exact technique. Many real estate investors own dozens of properties outright from utilizing this technique.

Important Instruction: Each time you send your big extra payment (in the above example it was $6,000) to your lender, be sure to call them ahead of time and let them know you’ll be sending a large pre-payment. Be sure and clearly state the payment is to be applied to the loan’s principal. This is very important. If you don’t do this, the lender may apply the payment to the loan interest or even put the money in escrow. This would be very bad, as it would totally negate all your efforts of paying off your mortgage and building equity. |Remember to check your mortgage contract to make sure that any prepayments made will be applied to principal. Some lenders will state in their mortgage contract that prepayments go to escrow. This is BAD as you cannot reclaim those funds for any useful purpose. Your signed contract is the ultimate source of truth for all transactions. Read it carefully!|

Also, be sure to get the name of the person you spoke to. You’ll want to keep track of this transaction to make sure that your efforts pay off. Also request to receive a receipt or statement that shows when your extra payment was applied to the loan principal. If you notice that it wasn’t, you’ll have the name of the person who handled your transaction to clear it up.

You’ll want to send your extra payment by check so that there’s a receipt of your payment. Send the check with the following letter:

Example:

Important payment information enclosed

August 28, 2004

Re: Additional principal payment
Loan #0000-00-99999

This payment is to be made on behalf of:

Your name
Your property address

Extra monthly payment to be applied
to principal is $6000.00

If there are any questions or problems with
this payment, please contact Your name
at 777-777-7777.