Mortgage Killer Accelerator

Strategy 46 of 107

Claim every tax credit you qualify for and send the refund to principal

Most predictableFrom new cash flow, not your paycheck

What it is

Check the Earned Income Tax Credit tables against your income and family size; many who qualify never claim it.

Steps

  1. Check the Earned Income Tax Credit tables against your income and family size; many who qualify never claim it.
  2. If you save in an IRA or workplace plan, check the Saver's Credit; if you pay for child care, check the child and dependent care credit.
  3. File with free help if eligible, and send the refund to principal the day it arrives.

Repeat: Every tax year.

Measure: Credits claimed (enter as a yearly amount).

Try it in the calculator Enter its amount in "Yearly amount to principal". Add a payoff goal of 5 years to see what is still needed.

Risks

  • Claim only what you qualify for; wrong claims can be denied with penalties.
  • Credit rules and income limits change yearly.

Who it fits

Average household, Single, No high school diploma, No college degree, College students, Grandmas and grandpas (62 and over), Married couples, Newlyweds

Needs

Any homeowner with a mortgage.

How predictable

Most predictable: once in place, the payoff date is arithmetic

A worked example (hypothetical, not guaranteed)

Picture a hypothetical household (average household). They owe $300,000 at 6.5% with 30 years left. The required payment is $1,896 a month, and that payment, which comes from income, never changes in this example.

They follow the steps: check the Earned Income Tax Credit tables against your income and family size; many who qualify never claim it.

Suppose it brings $6,000 once a year on principal. The loan would be paid off in 17 years 11 months instead of 30 years, saving about $173,949 in interest. To finish in five years, they would still need about $3,488 a month more from other strategies. That is why the five-year sequences stack several at once.

The amount above is chosen only to show the arithmetic. It is not an estimate of what this strategy will produce for anyone. Put real numbers from the fact finder into the calculator.

Sequences that use it

  • Tax refund harvest: Claim what you are owed this year and the last three, then stop overpaying going forward. Every refund goes to principal.

Sources and more information

Where to get help

Related strategies

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