Mortgage cycling is a way home owners can use to try and pay off their mortgages early. By making extra payments and paying off your mortgage early you can save yourself many thousands of in interest payments.
The basic principle of mortgage cycling is to have a flexible mortgage where you are able to pay extra payments every 6 or 12 months to reduce the amount of the mortgage debt.
This is when mortgages cycling can be used to make additional payments to reduce the mortgage and pay it off early. Basically you make a commitment to pay a lump sum payment every 6 or 12 months to reduce the principal of your mortgage. (Principal here refers to the amount of debt that you have.) If you have the enough disposable income to pay this extra payment on top of your regular mortgage payments then it can be very beneficial.
The difficulty is when you struggle to meet these extra demands. Some mortgage advisers suggest that it can actually work out better in the long run to take out personal loans, (secured against the value of your house) to make these payments if necessary. At first glance this doesn't seem to make economic sense. The personal loan is likely to be at a higher rate of interest than your mortgage. However if these loans are just temporary to overcome cash flow difficulties then in the long run it can still save you money. This is because of the big savings that coming from paying off the mortgage deals early as illustrated in the above example.
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