By George L. Duarte, MBA, CMC
Broker, Horizon Financial Associates
An increasing number of baby-boomer homeowners seem to be resigning themselves to the fact that, unlike their parents, they will be making mortgage payments well into retirement. If you look at statistics, you can see where this anxiety comes from. The average age of a person taking out a 30-year mortgage in California is 45 years old. Unless those people sell their homes or pay off their loan early, their last mortgage payment won’t be made until they are 75 years old! And to pay off that loan early isn’t easy, because the borrower has to make significant changes to the family budget to squeeze in the extra principal payments.
Thankfully, there is now a better way to retire mortgage-free.
Use the revolutionary Home Ownership Accelerator loan to accelerate paying off your home loan without changing your family budget. You simply deposit your monthly paychecks directly into this innovative line-of-credit, reducing your loan balance until you pay your bills. While you aren’t using the deposited money it keeps your principal balance lower, which can save you tens of thousands of dollars of interest over time. The money you save remains in the account, further reducing your balance. So, just by changing where you deposit your income, you can pay off your loan years earlier with no change to the family budget.
If you want to further accelerate the pay-down of your loan balance without changing your family spending habits, consider parking your rainy day money in the account. Your rainy day fund is probably sitting in a low-interest bearing savings account or CD. Switch that money into your Home Ownership Accelerator account, and that money will immediately reduce your loan balance, saving you even more interest. (Your “effective yield” on your rainy day fund is now equal to your loan’s interest rate!) And you haven’t lost access to your rainy day fund: You can tap into it instantly by writing a check or using your debit card. Until that rainy day comes, however, your cash is working aggressively to help you pay down your loan faster.
Overall, by flowing your day-to-day income and expenses through this line-of-credit, and parking liquid cash accounts such as savings and CDs in the account, you could accelerate your mortgage pay-down fast enough to completely pay the loan off in about half the time. Which means, even if you are a baby-boomer, you can actually retire mortgage-free! While this sounds too good to be true, this loan is for real! If this sounds intriguing enough to discuss in greater detail, give me a call.
Take a closer look at the new Home Ownership Accelerator loan.
The Home Ownership Accelerator can dramatically improve the speed and lower the cost of paying off your mortgage. It does this by replacing your mortgage and your checking account with one new account that puts the cash that you usually flow through your checking account to better use.
How does it accelerate the pay-off of my mortgage?
If you are like most people, you flow most of your cash through your checking account to pay for your monthly expenses. While this cash sits in your account waiting to be spent, it earns 1% or less in interest. Your bank takes that money and lends it out to other folks at 6% or more, giving them about a 5% profit on your cash. By combining a checking account with a mortgage, you take the bank out of the equation and keep most of that 5% profit. Instead, you “lend” your cash to yourself, parking it against your mortgage balance until you need it to pay your bills. This reduces your mortgage balance, saving you interest charges. So, your cash “saves” you 5-6% in mortgage interest, rather than earning 1% in a standard checking account.
If I flow my income through my mortgage, how do I pay my bills?
The Home Ownership Accelerator is actually a big home equity line of credit with full 24/7 access to your home equity. The loan requires you to direct-deposit your paycheck into the mortgage account, which immediately reduces your mortgage balance by that amount. Then, you use ATMs, checks, bill-pay or automatic debits to pay your bills, just as you do today with your traditional checking account. These withdrawals are simply added back to your mortgage balance.
How does putting my paycheck against my mortgage save me interest charges?
Mortgage interest is calculated by multiplying your loan balance by your interest rate. With this loan, we calculate your interest charges daily and add them to your mortgage balance at the end of the month. Each paycheck deposited immediately impacts how much interest you have to pay because it reduces your mortgage balance until you begin to pay your bills.
You actually save interest in two ways. First, the money you don’t need for expenses saves you interest by keeping your mortgage balance lower. Second, the money you do need for expenses saves you interest while it is waiting in around in the mortgage account to be spent.
What do I need to change to make this loan work?
One thing you DON’T need to change is your spending habits. If you have positive cash flow now, your current family budget could allow you to almost double the rate at which you pay down this mortgage versus a traditional mortgage.
You will have to change how you view your mortgage. Some key differences are:
Your paycheck is your mortgage payment. You do not write a separate check to “pay the mortgage” every month, unless you max out your credit line.
The interest you owe is “paid” automatically when your next paycheck is deposited into your account. You do not write a check to pay interest charges.
Your spare cash is in your home instead of in a checking account. Your cash is, in effect, converted to home equity until you need it, saving you interest until it is spent.
Interest rates are due to rise. How will this affect my pay-off schedule?
The Home Ownership Accelerator is a home equity line of credit (HELOC) with an adjustable interest rate that is tied to the 1-month LIBOR financial index. So, your interest rate may vary monthly. However, because your loan balance could decrease more quickly than with a traditional mortgage, you will probably pay off your loan faster even in a rising interest rate environment. That is one of the key advantages to this new loan.
How do I know if this loan is right for me?
Refinancing into this product, or buying a new property with it, could result in tremendous financial benefits. If you are interested in learning more about this innovative loan program, and setting up a free consultation, call me at 800-956-6663 x 107, (800-956-MONEY).