GENERAL COMMENTS ON ACCELERATIONS & SPLs
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              Prepayment  strategies, especially for mortgages, should 
         consider  prepaying  unequal extra amounts towards principal.  
         A  simple example makes the point.  With no prepayment, a 30-
         year  mortgage  for  $50,000 at 9% is paid off in 360 monthly 
         installments  of  $402.32  (total interest, $94,835.20).  The 
         simplest  prepayment  strategy,  and the one suggested by the 
         article,  is  to add the same extra amount each month.  If an 
         extra  $50  were added to every payment, the loan is paid off 
         in  237  payments,  and  $37,900  is saved in interest.  This 
         strategy  yields an effective annual percentage rate (APR) of 
         8.978%.   Over  the  life  of the loan, it prepays a total of 
         $11,850 toward the principal.
         
              Significantly  better results are provided by a strategy 
         using  unequal  prepayments.   If an extra $100 were added to 
         the  first 60 payments and $35 to the rest, then the mortgage 
         is  retired  in  only  218  payments, and $45,614 is saved in 
         interest.   The  effective APR drops to 8.645%, a substantial 
         reduction.   And  the  total  prepayment against principal is 
         actually  a  few  hundred  dollars less!  Still better strat-
         egies  can  be developed by gradually tapering the prepayment 
         amount,  but  this  simple  examples  illustrates the general 
         effect.
         
              Another   important   concern   in   developing  a  good 
         prepayment  strategy  is the effect of interest rate changes.  
         This  is  particularly  important  to anyone financed with an 
         adjustable  rate  mortgage.   When,  and  by  how  much,  the 
         interest  is  changed  will materially affect the performance 
         of  any prepayment schedule.  Even the best strategy can fall 
         apart  because  of  interest  rate  fluctuations that weren't 
         taken   into   account   when   it   was   developed.  Proper 
         consideration  of this issue is a must for anyone thinking of 
         prepaying an ARM.
         
              Besides  prepaying existing loans, there are alternative 
         borrowing  strategies that should also be considered.  One of 
         the  best,  and  most  under-utilized,  is  the  skip payment 
         loan.   In  an  SPL,  specific  payments  to  be  skipped are 
         prenegotiated  by the borrower and the lender at the time the 
         loan  is  made.   SPLs are very useful in leveling cash flow, 
         and  they  can  be  prepaid  like  any other direct reduction 
         loan.
         
              Parents  looking ahead to college expenses, for example, 
         can  use  an  SPL  mortgage  to  plan  for  major  cash  flow 
         variations  years  before  they actually occur.  The best SPL 
         schedules  allow  you  to  skip any prenegotiated sequence of 
         payments,  not  just the same ones each year.  In the college 
         planning  situation,  the  first  skipped  payments  probably 
         won't  occur  until  many  years after the loan begins.  SPLs 
         are  also  useful  to individuals with fluctuating income, or 
         who  experience  cash  crunches  due  to holiday gift-giving, 
         vacation costs, or other predictable expenses.