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New, innovative home loan plan can save homeowners thousands
Checking plan with mortgage can pay off loan years earlier

by Jeb Bing

The way that you look at your mortgage could change.

Financial experts are suggesting that homeowners no longer have to be stuck in the regular old 15- and 30-year fixed-rate mortgage that locks up your money that you have put into it forever unless you sell or pay to refinance. Nor must you get trapped in negative amortization and have a larger loan than you started with unless that was your plan.

"Today there is a 'new guy in town' called the Home Ownership Accelerator that offers a unique and logical plan to help you pay off your mortgage sooner, save thousands of dollars in interest and allows you to draw funds out of your mortgage for investments or emergencies when you need them," explained David Walden, a Pleasanton Certified Mortgage Planning Specialist with Diversified Capital Funding.

"Now initially," Walden added, "mortgage holders may think that this is a bi-weekly scheme where they pay their mortgage every other week instead of once a month with the calculations giving them one extra payment that will pay down their mortgage earlier. Wrong! Simply put it is a cheaper home equity line of credit on steroids."

The Home Ownership Accelerator is a mortgage with a checking account welded into the plan. It has all of the same features of a checking account, free checks, ATM access, online banking, and more. But the homeowner's mortgage is part of it. The breadwinner's payroll checks are automatically deposited into his checking account, where the mortgage's interest rate is calculated daily and averaged over the entire month, and then automatically deducted once a month. The plan is based on a fast-growing Australian model now used by nearly a third of homeowners in that country. According to a report by CMG Mortgage of San Ramon, homeowners deposit their paychecks directly into the new line of credit mortgage account, and they write all of their expenses out of the mortgage as well.

While they are not using their money, it reduces their daily loan balance on which interest is computed, the CMG report stated. Over the life of the loan, this can saves tens or hundreds of thousands of dollars in interest, compared to a traditional loan.

"With this plan you can easily take a $640,000 loan on an $800,000 piece of property and actually only pay interest on what you owe to your existing lender, letís say $350,000 and have $290,000 in reserve to draw upon anytime you need for investments or emergencies through your checking account without any further qualification," Walden explained. "Putting the two concepts together, you have a checking account with a cash balance of $640,000 in assets and you have a mortgage loan for $350,000 that calculates interest daily."

"This is a huge win for homeowners," added Chris George, CMG's president and CEO. "With today's creative loans, consumers are taking on more and more debt, debt that will probably be with them well into retirement."

"Finally, here's an opportunity to shift the focus from simply minimizing payments to actually paying them off efficiently, quickly and with no change to lifestyle," he explained. "It's not magic. It simply takes the interest spread the banks had and gives it to the consumer."

Walden said that this is a cheaper home equity line of credit in that instead of being based on the Prime Rate, which is where home equity loan costs are figured, it is based on a life of the loan fixed margin and the LIBOR index that fluctuates with the Fed Funds Rate "which is soon to be going down."

It's not for everyone," said Doug Nesbit, CMG's Vice President of Marketing. "You need to have positive cash flow and be disciplined about your use of equity. Bu for those people, the benefits can be amazing."

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