dubpoet...that is almost correct....what really can help is if you have a simple interest or a schedule to schedule interest loan is that if you pay bi-weekly (not twice per month) then you can probably pay off a 30yr note in 20-24 years depending on int rate. you can accomplish the same thing by making a 13th mtg payment each year. (i.e - double up every december) if you can afford to do this, and are maxing out the majority of your employer matched investments, roth iras, and have no high interest unsecured debt then you MUST!!!!
I am a licensed Mortgage Broker.
This program is highly used in Australia, and fairly new in the USA if u consider 3 yrs new.
what you are talkin about is the Home Ownership Equity Accelerator program . (id guess)
IT basically has u direct deposit all of your work checks and any other money u have into the account (your mortgage) and it becomes ur actually bank account. Each time you write a check (from your normal income) it is now taken back out of the equity in your house to pay debts off and the house payment/car/credit debt/other.....the advantage is, most bills are due at seperate times form when u get paid and Intrest is calculated on a per diem basis, so even if u pay ur car pmnt jus 4 days lets say after u had ur check directed deposited..and u have a 400$ car pmnt. (well u had 400$ less principal owed on that mortgage for 4 days, so interest was less.....lets say u have a 6% well its 6% per year, but divide that by 365 and that is a VERY ROUGH estimate of what ur interest is per day.....so u saved that figure multiplied by the payments going out for the amoutn of days you had them in bank temporarily...in this case 400$ and 4 days ......now this may only add up to pennies or dollars if u only think about one account paid (car) and one month (out of 360---30 years)...but over time ..pennies and dollars turn into thousands upon thousands.....U can also get tax deductions now on ur car pmtns, and credit cards. which everyone DREAMS ABOUT but can only use their mortgage interest and mortgage taxes to itemize.
It also TRUTHFULLY allows you to make ZERO mortgage payment if u do it right.
say u own a company and u bring in checks of 10K each month but only net 2-4K after all bills and supplies are made.....u can ACTUALLY run every dollar through this account for even jus a day or more (obviously better) to turn urself over to either purely ZERO interest or a net effective of positive gain on your money (works like a svaings account)...if u own properties and collect rents, this mortgage is the best thing that ever happend.
Let me know if u need some more help.
Alll and all it is a great product but there is many more like it out there and this program also has disadvanatages other than taking a regular fannie mae or government fha loan.
You have my permission to get my email from the mods, and maybe we can set up a phone chat so we can talk about some of ur options.
Let me know
Corey
i thought id leave u the answer to biggest question i get bout this as well
Why hasn’t this loan been offered to the public in the past?
It's simple. Banks have historically dominated the mortgage market, and they make money by paying small interest rates on deposits, and then loaning that money back out in the form of mortgages, earning a profit on the “spread” between their loan rates and deposit rates. If banks offered this to their customers, their spread would disappear, and with it, considerable profits.
Smoke and mirrors someone is making alot of money on. I believe they are on variable rate notes. So why trade your 30 year fixed at 6% into a variable at say 7.5%? Makes no sense. Lets say the average guy makes $5000 a month. He spends it equally over the course of the month. So day one is $5,000 but day 30 is zero. So the average balance over the course of the month is $2,500 less. Borrowing $2,500 less at 7.5% for 12 months is only a savings of $187 in interest.
The concept they sell is that you only spend $4,500 and at the end of the month you have a lower balance because the $500 has now paid off $500 towards the mortgage. Do this every month for x number of years and your house is paid off. Well it wasn't the mortgage, it was the fact you were ineffect making extra prinicpal payments.
Well you could accomplish the same thing and even faster if the interest rate on your mortgage was lower. Take the guy with a 30 year fixed at 6%, makes an extra $500 towards principal each month and he will pay off the mortgage faster because he is paying less in interest.
OH they will argue you can then use the money from the equity line as you need to "borrow back from it" and the flexibility it has. Well go get a home equity line on your house with the equity from paying the extra $500 each month and you would have the same flexibility.
Here is the big thing to know: THE PERSON SELLING THIS PRODUCT GETS PAID ALOT TO GET YOU TO DO IT BECAUSE THE BANK GETS PAID A HIGHER INTEREST RATE!!!!!!!!!
The concept they sell is that you only spend $4,500 and at the end of the month you have a lower balance because the $500 has now paid off $500 towards the mortgage. Do this every month for x number of years and your house is paid off. Well it wasn't the mortgage, it was the fact you were ineffect making extra prinicpal payments.
Well you could accomplish the same thing and even faster if the interest rate on your mortgage was lower. Take the guy with a 30 year fixed at 6%, makes an extra $500 towards principal each month and he will pay off the mortgage faster because he is paying less in interest.
OH they will argue you can then use the money from the equity line as you need to "borrow back from it" and the flexibility it has. Well go get a home equity line on your house with the equity from paying the extra $500 each month and you would have the same flexibility.
Here is the big thing to know: THE PERSON SELLING THIS PRODUCT GETS PAID ALOT TO GET YOU TO DO IT BECAUSE THE BANK GETS PAID A HIGHER INTEREST RATE!!!!!!!!!
The state of Ohio is currently in the top 5 in foreclosures in the country. It probably doesn't help if they are pushing products that most of the consumers do not understand or will effectively use to their advantage. Negative am loans are great products if the person has equity in their home and is using the lower payment to make money in other ways. It is a horrible product for someone who isn't aware of the higher interest rates and the fact that the lower payment is eating the equity that exists in their house. Funny COuntrywide's portfolio countains approxiamtely 40% of these loans and they borrowed 11.5 billion this week and got another 2 billion fron Bank of america. No one on wall street wants these is their portfolio even with the higher rate of return
IF you don't have to take out a second mortgage, don't do it.
Paying off debt with more debt is NOT a good idea (Surfing). By having access to a credit line (HELOC), there's a good chance, if you are NOT disciplined that you will borrow against the HELOC over the course of time, especially if you don't have a defined written budget for each month.
Keep it simple. Stay with a 30-year conventional (preferably 15-year conventional), but make extra payments towards your prinicpal.
Paying off debt with more debt is NOT a good idea (Surfing). By having access to a credit line (HELOC), there's a good chance, if you are NOT disciplined that you will borrow against the HELOC over the course of time, especially if you don't have a defined written budget for each month.
Keep it simple. Stay with a 30-year conventional (preferably 15-year conventional), but make extra payments towards your prinicpal.
jus to comment on the end of ur statement....countrywide does not and will never service one of the loans that timetopay was speaking of....but if u ment countrywide has negative amortization loans, u are correct, but this loan is not a negative amortization loan.
I also dont think this loan is the best idea as I stated before UNLESS u are a property investor or have HUGE cash flow (for example..own a company)...if not FHA/VA/Fannie mae is way better of a loan.
I know it is not a negative am loan, i was just talking about another type of loan that the average guy doesn't understand and turns out to be bad for him.
Will cover in regards to a 15 year versus 30 year or for that matter making extra principal payment to pat your mortgage off. I think both are not good long term plans.
If someone is displined with their money it should go into some long term savings. Instead of having a $200 higher payment on a 15 year mortgage versus a 30 year. Take the lower payment and increase your 401k or IRA contribute. All the investment has to do is get a better return than the interest rate you are paying and you will be ahead. If you are borrowing at 6% and you 401K is returning 9% you are ahead 3% without taking into consideration any of the tax consequences which should favor the 401k option.
Will cover in regards to a 15 year versus 30 year or for that matter making extra principal payment to pat your mortgage off. I think both are not good long term plans.
If someone is displined with their money it should go into some long term savings. Instead of having a $200 higher payment on a 15 year mortgage versus a 30 year. Take the lower payment and increase your 401k or IRA contribute. All the investment has to do is get a better return than the interest rate you are paying and you will be ahead. If you are borrowing at 6% and you 401K is returning 9% you are ahead 3% without taking into consideration any of the tax consequences which should favor the 401k option.
