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Mortgage Freedom Plan

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  • Home
  • Plan Details
    • First Lien HELOC Benefits
    • 30 yr mortgage vs. HELOC
    • How it Works
    • Full Access
    • Qualifications
  • FREE Analysis
    • FREE Analysis
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    • FAQ's
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  • More
    • Home
    • Plan Details
      • First Lien HELOC Benefits
      • 30 yr mortgage vs. HELOC
      • How it Works
      • Full Access
      • Qualifications
    • FREE Analysis
      • FREE Analysis
    • FAQ's
      • FAQ's
    • Contact Us

Mortgage Freedom Plan

Mortgage Freedom Plan Mortgage Freedom Plan Mortgage Freedom Plan

Call 949-383-7121 for a FREE Analysis

  • Home
  • Plan Details
    • First Lien HELOC Benefits
    • 30 yr mortgage vs. HELOC
    • How it Works
    • Full Access
    • Qualifications
  • FREE Analysis
    • FREE Analysis
  • FAQ's
    • FAQ's
  • Contact Us

30 yr mortgage vs. HELOC

  

The Mathematics Behind the Magic: Why Interest Calculation Method Matters More Than Rate

Here’s where most homeowners miss the forest for the trees…they obsess over interest rates while ignoring how interest is calculated. This oversight costs the average homeowner over $200,000.


Traditional Mortgage
Interest Calculation (Amortized)

  • Calculated on the previous month’s ending balance
  • Interest is “front-loaded” in an amortization schedule
  • Early payments are 80%+ interest, barely touching principal
  • No benefit from mid-month deposits or payments

First Lien HELOC
Interest Calculation (Average Daily Balance)

  • Calculated on your average daily balance
  • Every deposit immediately reduces interest charges
  • Interest recalculates daily based on current balance
  • Rewards cash flow management and strategic timing


 

The Interest Rate Illusion: Why Your 4.5% Mortgage Actually Costs More

Here’s the truth that makes mortgage bankers uncomfortable: The interest rate on your loan matters far less than how that interest is calculated, and how long you borrow for.


The Hidden Truth About Mortgage Interest

Your “low-rate” mortgage uses amortization, a calculation method designed in the 1930s to ensure banks get paid first. Here’s what they don’t advertise:

On a $300,000 mortgage at 4.5%:

  • Month 1 payment: $1,520
  • Amount to principal: $395 (26%)
  • Amount to interest: $1,125 (74%)

After 10 years of payments ($182,400 paid):

  • Principal paid: $59,731
  • Interest paid: $122,675
  • You’ve paid $182,400 to reduce your loan by only $59,731


 

The Actual Cost of Funds: What Really Matters

By using “Actual cost of funds” as your decision making criteria about a loan, you bypass the banking industry’s marketing and focus on the total interest you pay over the life of the loan. This depends on three critical factors:

  1. Interest Calculation Method (daily vs. monthly)
  2. Payment Application (when payments reduce principal)
  3. Time to Payoff (duration multiplies cost)


Real-World Proof: The $300,000 Comparison

Traditional Mortgage (4.5% rate):

  • Interest calculation: Monthly, on previous month’s balance
  • Payment application: Once monthly, mostly to interest
  • Time to payoff: 360 months
  • Actual cost of funds: $247,220 (82.4% of original loan!)

First Lien HELOC (7.5% rate) with Mortgage Free Plan:

  • Interest calculation: Daily average balance
  • Payment application: Every deposit immediately reduces principal
  • Time to payoff: 74 months
  • Actual cost of funds: $68,000 (22.7% of original loan!)

The “higher rate” HELOC costs $179,220 LESS in actual interest!


The Bottom Line: Rate vs. Reality

Stop asking “What’s the rate?” Start asking “What will I actually pay?”

A 7.5% First Lien HELOC that you pay off in 7 years costs dramatically less than a 4.5% mortgage you pay for 30 years. This isn’t a scam or trick. It’s simple math combined with a superior calculation method.

The only “scam” is the traditional mortgage system that keeps you paying mostly interest for the first 20 years while your equity remains locked away, inaccessible without expensive refinancing.

Remember: Banks have convinced an entire generation that paying $547,220 for a $300,000 house is “normal.” The First Lien HELOC strategy simply offers an escape from this expensive normalcy.

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