Think about your mortgage as a triangle. One leg of the triangle is the term, one leg is the principle balance and one leg is the interest rate. Each one contributes to the total cost of the mortgage. If the interest rate is small, one leg of the triangle may be shorter than the other two legs. If the principle balance is small, that leg may be shorter than the other leg, and that affects the total cost of the loan. I could go on but you get the picture. The point is that the shorter you make each of the legs the smaller the total cost of the loan would be in the center.
Lowering the interest rate through a refinance may reduce the intrest rate, but typcially you lengthen the term leg, and the total interest cost goes up. In addtition, when you refinance you incur additional closing costs that can never be recouped. So back to the triangle illustration again.......Lowering the interest rate shortens the one leg of the triangle, but going back to a 30 year loan extends the term leg again and raises the total cost again. You could lower the interest rate and the term through a refinance i.e go for a 30 year to a 20 or 15 year loan or lowering the interest rate at the same time, but again you will pay closing costs each time and that can be expensive and again you can never recoup those the cost. I am not saying that refinancing is not a good thing. There are cases when that is absolutely the means to an end.
You get the picture as it relates to interest cost and your personal loan. The Home Ownership Accelerator introduces another variable to the interest rate picture and for the most part it is one over which you have complete control. It is your own money. Every time you get paid or earn a commission, get dividends or receive any income from any source, that money can be applied to your mortgage loan with the opportunity to retrieve it during the 30 year period or less that you have the mortgage.
I know you are saying to yourself that this is a concept of just paying additional principle each month. We all think that we can pay down the mortgage balance by making additional principle payments, but in truth, we rarely have the discipline to do that on a continuous basis. In addition, if we need that money for some emergency there is no way to get it back except through a refinance, and we have already been down that road. So we won't go there again.
In short what makes the HOA so good? You do, or more to the point, your money does. The next installment will show you the mechanics of how it all works.