Lately we have seen the emergence of the Home Ownership Accelerator programs again. They are touting that you can drastically reduce the amount of time it takes you to pay off your loan with the same budget you have today. What they are not telling you is that this program only works if the homeowner is responsible enough to manage the money as the expensive software (made with Excel spreadsheet) dictates it should.
The only true way to pay down your mortgage quicker is to reduce the principal balance so the amount of interest due decreases monthly. Most cannot do that without paying more than the scheduled payment.
Enter- the Home Equity Accelerator loan! The HEA loan is an actual mortgage loan that comes with a check book similar to a HELOC (Home Equity Line Of Credit). This loan has added benefit over most HELOC's as it is a fixed rate based on the 10 year Treasury yield as most other mortgages are. HELOC's are based upon the Prime Rate and have adjustable rates, which will undoubtedly increase over the next few years, cutting into the proposed equity building. The substantial equity acceleration is due to the fact that your balance is considerably lower than it would be with a normal mortgage. You have your income deposited directly into the loan, which lowers the principal amount that interest is calculated on. The next thing you can do to keep that money in your mortgage checking account longer, is to pay all your normal monthly bills with a single credit card and pay it off when the bill comes. There should be no interest accrued since you are paying off the same normal amount that you would anyway.

As you can see, the interest due is decreased significantly because it is calculated on lower principal amounts for most of the month. This also is a great way to simplify and monitor your spending. Let's face it, if you saw your mortgage balance decreasing by several hundred or even a thousand bucks a month, wouldn't you be more consious of your spending habits? As you can see, the savings is astronomical and most of the folks that have these loans, keep their savings in this account. Isn't 4-5% a better return than the 1% or less you would get on a savings account?

If you have any other questions regarding this awesome equity building strategy, feel free to contact me.

Patrick McCarthy
Northpointe Bank
866-901-3576