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What Is an Australian Mortgage?

Over the past year a new phenomenon has hit the the United States from the world Down Under. It's called an Australian Mortgage and refers to a financial strategy that's been used in the Australian and European markets for many years.

The purpose of the Australian Mortgage is to decrease the amount of interest that you pay on a mortgage while increasing the amount of principal that you pay towards the mortgage. The net effect is that you can own your home free and clear in 1/3 to 1/2 the time it would take to pay of a traditional 30 year mortgage. If used properly homeowners can save tens of thousands of dollars in interest payments to banks over the term of the mortgage.

In other words, the Australian Mortgage is a type of Mortgage Accelerator. The concept is not a new one, it's just being packaged and marketed differently and the American Citizens are now becoming aware of this mortgage planning tool.

How Does the Australian Mortgage Work?

A true Australian Mortgage requires that you refinance your traditional fixed rate or ARM mortgage into a variable rate HELOC or ALOC. (Home Equity Lines of Credit). This means that your first and only mortgage will be a variable rate Home Equity Line of Credit. The HELOC will have a higher interest rate that can change on a regular basis. This higher interest rate is offset by the way the HELOC is managed. Here's the concept:

1. A HELOC (ALOC) is acquired as a first on the subject property.

2. This HELOC will be used as your primary checking account, ATM and on-line bill pay account. In essence it replaces you current checking and savings account.

3. Your monthly income from paychecks, dividends etc is deposited directly into the HELOC which dramatically drives down the principal balance on your mortgage.

4. All your expenses, including bills, grocery shopping, entertainment etc is paid out of your mortgage. The longer the money stays in the account, the less interest that you pay on your principal balance. This uses the money that is currently sitting in your checking account, earning little or no interest, and keeps your loan balance lower.

With this concept, less of your income is going towards paying interest which leaves more money to pay down principal which pays off your home mortgage faster with no change in spending habits.

Who Offers Australian Mortgages?

To my knowledge the only company that offers a True Australian Mortgage in the United States (True meaning the HELOC is used a first mortgage) is CMG Mortgage services. There was another company that had entered the market but I understand that it is no longer in business.

There are two companies that offer hybrid Australian Mortgages. These programs work the same way but use an ALOC as a second mortgage. Some feel that this is less risky and safer for US homeowners. The two companies that offer these programs are U1st Financial and Sydney Financial Group. I'll be covering these products in a different blog post. Of the two, U1st Financial is my preferred program.

Do These Programs Work?

The answer is an emphatic YES, but only if the client is responsible with money and has positive cash flow each month. The Australian Mortgage is not for someone who has uncontrolled spending or can't currently pay their bills. Other products would be more appropriate in that situation.

What are the Risks?

There may or may not be tax ramifications so it's important to have a good tax adviser on hand that understands how these products work.

Banks can freeze the credit lines on ALOC's. While rare and unlikely, it is a possibility and a risk that you should be aware of.

As mentioned above, if you are someone who tends to overspend, using your mortgage as an ATM machine is not recommended.

Is an Australian Mortgage Right for You?

This question is not quite so easy to answer. While I am a firm believer in The Australian Mortgage and the concept of Money Merge Accounts, they are not for everyone. Other debt elimination and equity management programs may be more appropriate for your needs. It's important that the Mortgage Planner that you choose to work with asks you hard hitting questions and takes the time to understand your financial goals. Your decision will depend on where you are in life, your income, your debt load as well as the equity that you have in your home.

In addition, the decision to choose an Australian mortgage should not be made in a box. It's important that the Strategic Mortgage Planner you work with has a team of Tax Consultants, Real Estate Agents, Insurance Agents and Financial Planners who are well versed in the concept of equity management.

Your home can be used to create incredible wealth. The Australian Mortgage can play a role in that wealth creation. You need to start with a plan and educated professionals who will provide you with the education that you need to make an educated decision.

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Kate Bourland is a Debt Elimination Specialist and Strategic Equity Planner located in Redding, California. Her specialties include Debt Elimination, Equity Planning and Credit repair with a focus on helping clients achieve financial freedom through education and outside the box thinking. She creates customized plans for each client that are focused on clients goals and needs. No matter what your goals, Kate is committed to providing solid professional planning to help you achieve those goals. Contact Kate by e-mail or by phone at 530-244-4345.

Posted by Kate Bourland Empowering America to Live Debt Free on 11/01/2007 02:34 PM

Comments (45)

australian mortgage, debt elmination, mma, strategic equity planning, heloc, mortgage accelerator, mortgage acceleration

45 Comments on What Is an Australian Mortgage?

NOV

2007

Hey Kate,

I've seen these advertised quite offenbut have never taken the time to check out the benefits. It is about time that I do.

Sean Allen

Sean, it will be worth your time to educate yourself on the Australian Mortgage concept. The clients will be hearing about it and you should be prepared to answer questions. When understood, this a wonderful tool for clients and should be looked at as a part of a comprehensive equity management solution. Feel free to give me a call.

I totally agree with this system, I just cannot agree with the cost United First Financial is charging clients. I think the debt managment system is great but there are cheaper alternative then their service. Personally I think this is an awesome service. Great Post.

To everyone - unfortunately I had to delete a spam post by a U1st Representative who attempted to hijack the blog. The information contained herein is information and was written to educate. Sales pitches are not appropriate.

Gary, I appreciate your comment. I recently read your blog post on the subject and I think that I chose not to comment, although I may have. The purpose of this blog post is to educate both real estate professionals and the general public on the topic of Australian Mortgages. There are several products on the market that fall under this category. My hope is that this blog post helps to clear the hype just a bit.

In the next few days I will write a blog post on the hybrid Australian Mortgage products offered by UFirst and Sydney Financial. This post is not meant to be a discussion of those programs and I won't allow it. However, I am going to address your comment regarding the $3,500 cost.

Recently I saved someone $954,124 in interest and $1,226,031 in payments that they would no longer be required to make. That is a total savings of $2,180,155. If you subtract the $3,500 cost of the software you have a net gain to the consumer of $2,176,655. I just did the calculation on the return on investment of 621%. Over the top and almost incomprehensible but a real number.

Now let's take it down to a lower level for a different client. I saved them $11,507 in interest and $50,236 in payments that were no longer required to be made for a total savings of $61,742. The ROI on this is 17.64%. Where else can you earn 17.64% in today's market?

This is a product that you have to think outside the box on and get past the cost of entry. It's the savings and ROI that need to be analyzed.

As mortgage professionals, we have the opportunity to create wealth and ROI for our clients that far exceed what they can earn anywhere else. Wealth Creation through equity management is the future. When you see the numbers and comprehend how these different products can help people you will find it almost impossible to sleep. It's that exciting.

I understand that someone has created something for $24.00. I'm open to it, but I belive that the average consumer will more attention to something that they spend $3,500 on and will ignore something that they spend $24.00 bucks on. I spent $27.62 at McDonald's last weekend for my family - how much value was in that.

I could go on and on but I'll stop!

Great program for business owners who have a lot of cash flow!!

:-)

NOV

2007

Kate.... I just care for this program for the main reason that the average American can't save his or her money. The average savings account has less than $1,500. Those overseas seem to save more. This program has been around the United States the last 2 years. It's one of those that could be classified as a wealth builder for those with money. Hence the old saying, the rich get richer? ;o)

Seriously though, I am not trying to be negative here and educating is good. But as Gary mentioned, some of these companies charge high fees to do this. Think about this, take those fees and dump them into your loan as a principal payment. Also... this is based on a HELOC rate that is higher than normal rates. I personally just think that there are too many wholes in this type of loan that could be devasting for the client. Do Pay Option arms sound familiar? Just think about it.... that's all. Again, just my opinions...

jeff belonger

Kate,

That is a clear-cut explanation about the Aussie mortgage payment strategy and how it works. The concept seems to have merit, but as you point out, wouldn't work for everybody. Consider anything viable that would cut your housing expense.

NOV

2007

There are 3 companies in my state that are really trying to capitalize on this. Thanks for explaining!

Jeff, I didn't realize that you had stopped by. Good to see you. You point out some excellent issues. Now that I've seen the software for U1st program in action, I don't object to the fees. The value above and beyond the mortgage acceleration is pretty phenomenal. Clients are given a tool and have the opportunity to really grasp where their money is going and take control of their finances. My objection to the product is that non-mortgage and non-financial people can sell it. Used in conjunction with equity harvesting and under the advise of a knowledgeable mortgage professional the product has the ability to create huge wealth.

Esko, you are absolutely right. This is not right for everyone. It's worth a free consultation to put together a plan though.

Pete, you are welcome!

NOV

2007

Kate - very interesting. I have been around the mortgage world in one form or another for 15 years and this is the first I have heard of this particular product.

Like all programs, they are only as good as the person's integrity that is recommending them, because as so noted above, this is NOT for everyone. Congratulations to you on your commitment to educating yourself and others, especially your own clients!!

Love learning new things! Thanks for this interesting post.

Linda, thanks for commenting. You are welcome for the information. We will be seeing new programs like these geared to helping people become debt free in the months and years ahead. The more I learn about these programs, the more I like them.

Thanks for you comment!

Kate, when you first mentioned the question 'what is an Australian Mortgage?' I immediately thought 'A mortgage with an accent?' Then, when I read on, I knew exactly what you were talking about. six or seven months ago I got intruduced to this type of mortgage by one of our Account Executives that works for u1stfinancial.com. I think it's a pretty good program and will consider it on my next house. With ten years left to pay off my house I'm not sure it's right at the moment.

DEC

2007

I just can't imagine the majority of borrowers having the restraint to only use their home equity for normal living expenses. It seems like we got into this massive mortage problem because so many people were using their homes like giant ATMs buying lots of toys. Also, most of the people I know live paycheck to paycheck PLUS put expenses on credit cards so I can see this being very dangerous for many people. How does this strategy work for the average American? I think I am missing something. Besides, wouldn't taking all your excess cash at the end of the month and putting it toward the mortgage end up doing something similar?

DEC

2007

I took a class on this type of mortgage and concluded it to be VERY beneficial for a certain type (responsible) of borrower. You summed the program up very well might I add. Thanks!

Anthony Fico

Great info...Thanks!

Shari, your comment makes me smile. In a society where fiscal policy is created to get the consumer to spend you are absolutely correct.

The point of this blog post is to explain to people what an Australian Mortgage is. The person that you describe is certainly not the ideal candidate for an Australian Type mortgage. However for the person who is ready to get off the ATM/debt roller coaster ride, the Australian Mortgage is a viable solution. thhis product is one of many choices and just like the Option Arm, 30 Year Fixed, 5/1 Arm, Interest Only and all the other products out there, it is not right for everyone.

To answer your question about putting excess cash at the end of the month to a traditional mortgage, the answer is yes and no.

The Australian Mortgage is an open ended loan while a traditional mortgage is a closed end loan. When you pay down principal on a closed end loan, you cancel interest, but you have difficulty accessing the equity. The only way to access it is through a refinance. In addition interest on closed end loans is calculated on the ending balance from the entire balance on the last day of the previous month.

In contrast, interest on an open ended Australian type mortgage is calculated daily based on the average daily balance. Because the loan is open ended, more interest is canceled AND the consumer has access to the equity up to the limit of the line of credit. This gives the consumer more choices.

The power of the Australian Mortage and subsequent off shoot called the Money Merge Account is in the open-ended ness of the loan.

I'm not saying the product is right for every one, no loan is right for everyone. Information is power and anyone doing their homework on these loans should have this information.

Came across a company that wanted $3500 for the software to run this program...

David, That's the MMA or money merge account. I personally like it because it's a software that keeps the client in tune with their expenses. In addition there is company support and other training that you don't get if you were doing it on your own. A lot of people can't get past the $3500 but I've seen first hand how clients have benefited from it, so I'm a convert! Again, it's not for everyone but for someone who is ready to take control it's an awesome tool!

Does this Australian mortgage require a minimum downpayment? Assume the borrower has great credit (i.e. responsible with their money).

Shari, the CMG product can go to 90% LTV. The MMA as a 2nd HELOC is going to vary but can go as high as 100% depending on client qualifications.

I have used a mortgage acceleration program based on a 30-year fixed loan and adding a set payment per month. I would be curious to see how the Australian mortgage would compare. I know it is impossible to know how interest rates on the HELOC may go up or down monthly but if you just assume they are staying where they are for a while, can you do the calcuation? How would it compare to a 6.25% 30-yr. fixed that the borrowers consistently add $1000 per month to the loan balance? Assume an 80% LTV.

How fast would the pay off be with the Australian mortgage and how much interest would be saved? Assume the borrowers have a very strict budget and never use their house like an ATM but always have $1000 extra per month to leave in the account.

I know they are two different programs but I am curious to see how it is possible to know a true timeline and interest savings.

DEC

2007

Watch my blog for a post comparing exactly what you are discussing. Side by side for 30 years there is not going to be a whole lot of difference EXCEPT in the opportunity cost of not having access to your equity by paying into a closed end mortgage.

The value of an Australian Mortgage is that as your mortgage gets paid down, you can access te equity quickly to take advantage of investment opportunities as they arrise. When you pay your closed ended mortgage down, it's just dead money.

The Australian Mortgage has a distinct advantage for people with a retirement horizon that is less than 30 years. This will be disucssed in future blog posts, but not here. This post is meant to explain what an Australian Mortgage is.

APR

2008

In the Maryland are there's a company offering simialr mortgage, but the mortgage is funded by GMAC, what's your thoughts about GMAC given there history in the mortgage market with so many foreclosures with ARMS?

I've heard of this but it wasn't explained to me as well as you just did. I thank you! Great Post

JUN

2008

Hi Kate,

Great post! I've actually been considering starting a system like this for about the past year. I just decided this month that I'd try to accelerat my mortgage payments by increasing my principal payment each month. Depending on my success, I might sign up for an australian mortgage account at the beginning of 2009.

We'll see what happens!!

Great site, and great info!

JUN

2008

I very much appreciate your post. A person selling the MMA program has contacted me (we work at the same company) about the program because I am a first-time homebuyer. I saw the company DVD, and the part that I don't understand in the demonstration is this: where does the money come from to pay off the ALOC? In the example, the person had approx. $346 per month left over in her budget after paying other bills. Over the course of a year, the MMA program had paid down her mortgage by about $10,000.00 (and there was one payment that was made to the mortage which was over $5000.00). Where does a person with that tight a budget come up with the money to pay this?

JUN

2008

Hi, Kate,

Your blog is excellent, and I appreciate that you emphasized the caveat that someone must be CURRENTLY responsible with how they spend their money in order to make this product a good strategy. I noticed some comments to the blog which found it necessary to point out that it is not good for everyone, but wasn't that one of your points?

I have always respected the Australian mortgage system and plan on a long business trip next year to bring home (to the U.S.) their residual system of compensation. In the nearly 20 years of this business in mortgage lending, I have always seen the worst cycles (such as the sub-prime mess of today) have originated from greed and fraud. Greed started and killed the sub-prime industry, and to this day (literally, today) I have heard from the sellers of mortgage companies that they would not consider mergers or joint ventures with other banking firms because the compensation packages would not "be worth it". Truly, many of the mortgage company owners and loan officers in this country got into the business because they heard there was a lot of money to be made (which, there is)- not because it fascinated them or that they felt they could help build people's lives in the process.

Money always seems to come first.

I hope that you read my reply and that I could ask you some questions down the line. I know that the brokerage industry, as it exists today, is on its last five-year leg of profitability. The investment bankers I meet with know it- I only wish the rest of the businesses would change the way they recruit, train, represent, and expect payment for- the origination of mortgage loans.

-P

I forgot to mention that I have had similar software from Australia for several years that was written by an American accountant working as an actuary in Perth (who, is now in Dallas). We plan on offering it for free to our clients and of course- potential loan officers. Can you tell me why they are charging $2,500 to $3,500 for the software? Is it being marketed to homeowners or is that a fee that mortgage brokers are paying for the rights to solicit the program?

I am not bashing the sellers of the program, just trying to figure out 'whom' is selling the software for a profit. I realize people have to make a buck when an ideal is novel, but I remember when we at the S&L's got out of the 'anaconda loan' business (which, was meant to save money, but turned into a bigger monster), and people were selling software disks at home trade shows, showing you how to pay your mortgae off early by applying semi-weekly payments... it seemed so new at the time.

JUL

2008

I hadn't realized that there were so many non member comments on this blog. I'll address the questions here:

Tracy: The fact that GMAC (and other banks) are offering similar programs is a testimony to the strength of these products.

Braxton: I wish that you would not pay extra to your closed ended mortgage principal each month. You are putting money into a closed ended loan and taking away your access to it, UNLESS, you have a HELOC that can access equity. Please read this blog post that explains the difference between open ended loans and closed ended loans. It's a critical point in understanding the Australian Morgage Concept. UFirst Financial has recently come out with version 4 of their proprietary software. Simply put it's the most powerful financial and debt elimination tool available to consumers today!!

Bonnie: The Australian mortgage works by canceling interest. I'd be happy to talk with you and help you understand how it works. Give me a call.

Peter: Feel free to ask questions.

Unknown: The UFirst product is worth every dime. IMHO, It is simply the most powerful debt elimination tool on the market. I smile when I read comments about "free" software that does the same thing. Does that "free" software come with a live customer service desk, personal one on one training and continued software updates/improvements that keeps up with market trends, conditions and changes? What if the loan officer that gave that free software to leaves the business?? Is there anyone for the customer to call and get advise, ask questions or support?

JUL

2008

I heard about this type of mortgage on the radio and went to the suggested web site: truthinequity.com. Are they reputable? I have spoken with one of their representatives and so far, I don't see any negatives for us in our situation. We just refinanced and also have a second - HELOC so we were told we could get into this with ease. We have 28 1/2 years to pay on our conventional loan but were hoping to retire in 3-5 years. There seemed to be no way to make that happen until I heard about this. Thanks. Wendy

Wendy.... I have been doing mortgages for almost 16 years now. This program is not the end to all of your problems. You can actually do what the program does on your own. And save yourself any fees involved. Secondly, because of the unstable market, helocs are much harder to obtain. Secondly, they can freeze a heloc at any moment. And it's been done to a few consumers that I know of. It doesn't matter who promises that they won't. Anyone can promise anything. It is mentioned in your paper work, that at any time, they do have the right to freeze your heloc.

Again.... there are better ways of doing this by yourself. This is just one persons opinion, that is leaving out some of the facts. You still need to spend more money monthly. They claim that these programs don't change your spending habits,yet they tell you to keep most of your pay check in this program. In reality, you can't spend that money. They lead you to beleiev that you can take some or all of it out. But it doesn't work the same as promised. Again, it's very misleading with a fine line. And this is not my opinion, because I have doneexamples of comparing both. That is reality, not some flashy program that makes it look easy.

jeff belonger

Wendy,

I have to agree 100% with Jeff on this. I think he and I have both written post in the past about some of the dangers of this program. Be careful with this.

Wendy, this is the first that I've heard of the Truthinequity product. so I can't comment on the product or the company. I don't know if it's an MMA or a true Australian mortgage, but it sounds like an MMA type product. I need to do a blog on the difference. This blog is simply information about the true australian mortgage. Mathmatically these programs do work and theoretically you can "do it yourself" if all your are trying to do is accelerate your mortgage. People can also lose weight by themselfs but it's a proven fact that people who seek help and support in losing weight lose more and keep it off longer.

Without knowing your entire financial picture I can't comment on whether this type of product would be good for you or not. It's like walking into a doctor's office, complaining of a stomach ache and having him recommend an appendectomy without ever examing you.

That said, from the snapshot that you gave above it does sound like this could be a solution for you and it could be a very sound decision based on your timeframe. Jeff's comment about HELOC's being frozen in this market is true, so it is a risk, but not insurmountable.

I have a very different perspective from Jeff and Gary. I can speak for the several products that I am familiar with, including my favorite, UFirst Financial, they are not dangerous. In fact they educate and empower you in ways that people who don't use the product will never understand. The biggest danger for you is in being afraid to act and doing nothing at all.

Feel free to give me a call, I'll be happy to chat with you and give you my thoughts after I have all the details and fully understand your history, your present situation and your long term goals.

Kate.... you keep disagreeing with me, but you never answer these questions of mine... not once have you answered them. 07/04/2008 12:32 PM and 07/04/2008 12:34 PM

There are reasons why I ask these questions....

jeff belonger

JUL

Wendy,

My conclusions for making my above recommendation does not come lightly. I personally enjoy reading and commenting on Kate's blog and I do not want to hijack her post.

In the past I have attended some of UFirst Financial Seminars and after reading it over and seeing the cost, I personally did not see the value in it. I also did not recommend it to my clients.

However, It can work. The question really is if YOU see the value in its costs. Some people do and some do not.

Kate is 100% right, that it can benefit people. I just like to debate her about at what cost.

Gary, Ouch!!!

Attending a semininar means that you have not actually used the product. It bothers me that someone who has not actually used the product (or at minimum been trained in it) is making public comments about it. I appreciate that you clarify that you personally do not see the value - it's unfortunate that the person who presented it to you did not properly explain the benefits - there are many benefits that have nothing to do with accelerating your mortgage - this debate is not appropriate for this blog post!

Again Wendy, your question is about truthinequity? I have not seen the trutyinequity product in use nor heard of the company until now. The premise of the product and Australian Mortgages in general is mathmatically sound. Australian mortgages are not a new concept, they have been used in Europe for many years.

This blog is not designed to debate individual products - it's soul purpose is to educate on the concept of an Australian Mortgage.

I have spent ten months researching products in this category and have seen and tested multiple products. There are two that I feel are top notch for the consumer.

Someone who is only 5 years from retirement is a prime candidate to benefit from the use of these programs. As I mentioned in my e-mail to your husband, as well as in my comment above, it's irresponsible of me to make a suggestion without knowing and understanding your complete financial situation.

Feel free to call me so that we can talk about the pros and cons for YOU!

JUL

Gary and Jeff,

Thanks for taking the time to respond. I am feeling a little overwhelmed with what I am reading and learning.

Kate,

Thanks for your kind offer to speak with me about our situation. I will take you up on that. I appreciate your dedication to educating people on the concept. Your blog as been very informative. You will be hearing from me soon.

Wendy, you are welcome. I'm sorry that you feel overwhelmed. In the end it comes down to looking at your individual numbers as well as your goals and timeline. Once you have that we can discuss the pros and cons for your situation to allow you to make an informed decision for you and your family!

JUL

While there is some merit to these programs for a very specific, savvy investor, it is extremely rare to find that person in our business. People come to Mortgage Bankers, Brokers, and Loan Officers because they are generally in need of our financial help, and advice. Unless the client in question is one you have a great deal of knowledge of, and experience with, these products are most likely not for them. I see where the statement is made above that people can be trusted to not stray from the disciplined path required to succeed in this product. I believe statistics will show those few who have that level of discipline would be the "exceptions that prove the rule" rather than the norm.

My 2 cents comes in the form of 2 questions:

If these products really worked as advertised, why isn't everyone offering them? From the Banks point of view, we would rather get the money back quicker so we can "roll" it again. After all, we made acceptable interest on it while it lasted, and we make money off of money, so the more we can compound the funds the better.

Also, why is it that Macquarie Mortgage (one of the biggest "pushers" of these products) had to withdraw from the US? I understand they have a very substantial market share overseas (over one third of the Australian Mortgage market, and around 25% in the UK), but there is a significant difference in mindset (read - likelihood to save versus spend) for most Americans. The current US "service" economy has spawned a generation that has no predisposal towards savings, we not only want it now, we feel we are entitled to it now!

If the buyer/borrower really had the necessary discipline to succeed in this product, they would probably be able to proportion enough of their savings into other investment vehicles that would provide a higher rate of return than that realized from the interest savings on their mortgage. They would not only increase their rate of wealth accumulation, they would lower the risk involved, and be very happy to reap the tax advantages provided by the mortgage interest.

Ron Brown

First Mortgage Company of Washington

JUL

Ron, these are valid questions that I will answer from my perspective and I'll ask a couple of questions of my own:

my answer: There are several banks that have these types of products in the works. I believe that one already has it available but I need to check my g2 before stating that as a fact. MMA type products are popping up all over the place and the banks are taking notice. In fact US Bank has seen the benefits of the UFirst product and has developed a working relationship with UFirst Financial to provide Heloc's under the name of AC Equity Direct,. This is still in test and is currently available in 10 states - so far the results are very promising. The test originally started with four states and was highly successful, thus the expansion to the additional states.

Ron stated: From the Banks point of view, we would rather get the money back quicker so we can "roll" it again. After all, we made acceptable interest on it while it lasted, and we make money off of money, so the more we can compound the funds the better.

My Comment: If it is true that the banks want to get their money back as quickly as possible, why is it that mortgage notes are written so that it takes 21 years of a 30 year mortgage before more of the house payment is applied to principal than interest?

Let's assume that a homeowner were to take out a $300,000 mortgage today, July 14, 2008: The amortization schedule would look as follows:

2008 Monthly Payment: $1330.60 $ Paid to Principal: $163.94 $ Paid to Interest: $1166.67

2018 Monthly Payment: $1330.60 $ Paid to Principal $329.46 $ Paid to Interest: $1001.14

2028 Monthly Payment: $1330.60 $ Paid to Principal $662.10 $ Paid to Interest: $668.50

The answer is very simple, banks are in the business of loaning money and collecting interest. There is also a profit that takes place from selling mortgage notes at a discount in the secondary market. It's the secondary market that allows banks to "roll" their money. Statistics state that the average consumer moves or refinances every 5 - 7 years. This process keeps the homeowner in perpetual debt!

As for your comment regarding Macquarie Mortgage - I haven't looked into why they left the US market but I tend to agree with you that it has a great deal to do with consumer mindset as well as the liquidity crisis. Think about it, when our own government issues a stimulus package and tells the consumer to spend instead of saving it or apply it to bills, we have a serious problem in this country.

This is exactly why I prefer the Money Merge Accounts offered by U1st or A+. Both have a consumer education piece incorporated in the products. It's this education piece that so many financial professionals miss when they dis-credit the products. The MMA empowers the consumer to take control of their money, for perhaps the first time in their lives. It's this interaction piece that is so important to changing the financial landscape of the American citizen. It's this interaction piece, it's this education piece that has made me very passionate about the products.

I have always had a problem with the true Australian Morgage such as that offered by CMG or Macquarie - because it is set and forget - the consumer doesn't have to pay as close attention, thereby limiting the effectiveness of the product.

JUL

your 7/4 post is a very key post that probably belongs in the original blog - The value I am hearing is similar to the support of a weight watcher program (or many of its competitors) - does it do any magic, no. Does it do something you can not do your self - yes - provide support. But do you need support - statistically yes by the number of people that achieve results with support over those who do not. But still no magic bullet.

Understanding the value of $3,500 sounds like a valid question (so is paying a point or 3 to a mortgage professional). But it is hard to explain, because the value is often different to everyone. Similar to the doctor - most of the questions a doctor answers could be looked up, but it is the overall trust of putting all the answers together with the trust that they apply to your situation today and do no harm is why we pay a trained doctor so much. The challenge is 'software' did not go to years of school and sit for exams to be certified by the state, so how do we build the trust?

I believe that when we hear statements that other countries save more, it is one of the challenges of trying to describe any group with a single statement. As Kate and others have stated repeatedly, it comes down to each individuals situation now (which includes their goals and objectives for the future). I would imagine that we hear about people from other countries because they are exceptions - including their willingness to delay gratification to save. There are probably millions in this country that meet that criteria (since 70% of homes are owned frree and clear), but certainly the majority (of whom most underwriting standards have to be written for) are not willing to delay gratification.

It would seem these types of programs have greater strength now in that the market is shifting from bull to bear - that moving cash into their home without needing to refinance to access a closed end loan.

I missed the link to comparing the different programs. I would love to see the comparisions. I have been following the CMG product for over a year as a professional and it is interesting to see who it and when it looks like a good match as our world changes.

By the way your link to u 1st is broken today.

AUG

Ron,

Money that is loaned out is literally created electronically, with the requirement that the bank has ~10 percent reserves to back up the money they are lending(though it is interesting that since the money they are lending does not exist- therefore how do you loan something that you do not possess?). When the loan is repayed, the money goes out of existence (the bank is not able to loan out money that is removed).

Jerome

SEP

Good info thanks.

DEC

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