Mortgage Accelerator

Monday, October 29, 2007

I was over at ReverseMortgageNation.com reading some Reverse Mortgage News, and found out about a new Mortgage Accelerator program called the Cash Asset Manager.

I then did a little more searching in Google, and found some good articles by BankRate.com and others.

Here is some of that article:

A different type of mortgage, called a "mortgage accelerator" loan, has migrated to the United States. It uses home equity borrowing and the borrower's paycheck to shorten the time until a mortgage is paid off, saving tens of thousands in interest expense.

Not to be confused with a biweekly mortgage loan, which shortens a mortgage by paying an extra mortgage payment once a year, the mortgage accelerator loan program is based on an approach common in Australia and the United Kingdom, where borrowers deposit their paychecks into an account that, every month, applies every unspent dime against the mortgage loan balance.

In the United States, the two firms offering these mortgages are Macquarie Mortgages USA, where it is called the Macquarie Asset Manager, and CMG Financial Services, whose offering is called the Home Ownership Accelerator.

The premise is that borrowers finance a new property or refinance existing property using a home equity line of credit, or HELOC. Borrowers then directly deposit their entire paychecks into the HELOC. Monthly expenses, other than mortgage payments, are funded by draws against the line of credit, whether that is by using bill pay, check writing, ATM withdrawals or a credit card tied to the line of credit. Even if you don't wind up making additional principal payments in a month, you still capture some interest savings because your average balance is less than it would have been with a conventional loan.

Let's say your mortgage payment on a conventional fixed-rate mortgage is $2,000 and your monthly net income is $5,000. With the mortgage accelerator, even if you spend the $3,000 difference, your average mortgage balance for the month is $1,500 less than it was with the conventional mortgage. That's because the entire $5,000 is deposited in the loan account and you made draws of $3,000 for living expenses spread over the month. At a 7.75 percent loan rate, that saves you about $10 in interest expense that month.

Now $10 here and $10 there does add up over time, although both loan programs have annual fees of $30 to $60, but the accelerator part of the mortgage lies in having all your net pay going against the mortgage and an assumption that you don't spend as much as you make.

All borrowers already have that money available with a conventional mortgage, too -- and without the cost of refinancing. A borrower would simply need the financial discipline to use all that money as an additional principal payment.

For the undisciplined, the mortgage accelerator program makes the additional principal payments automatically.

Where a mortgage accelerator loan program gives the homeowner additional flexibility, however, is in having the line of credit available if there is an emergency need for cash.

Mortgage accelerator loans have interest-only minimum payments during the first 10 years -- although that goes against the idea of paying off your mortgage as fast as you can. After 10 years, the line of credit decreases by 1/240 each month over the remaining loan term (20 years x 12) forcing principal repayment until the loan is paid off at the end of the loan term.

These loan programs aren't available in all 50 states. CMG's Home Ownership Accelerator program is currently available in more than 20 states, including Washington, and Macquarie's Asset Manager program is available in about 24 states with availability in a half-dozen more states on a correspondent lending arrangement.

For more information visit:

http://www.CashAdvisors.com/

You can also call 1-888-973-8377 to speak with specialist.