Home Ownership Accelerator....How It Works

By
Mortgage and Lending with Affordable Mortgage of Va.

Hi everybody. It has been a couple of days,  and I am finally getting around to finishing this post on  the HOA  and how it works.   Thanks for being patient. I have had a lot of commments with regard  to  my first two posts so it is important that this gets posted as quickly as possible.  Thanks for your input!

The truth of the matter is that the HOA product works by using your own money. That is where all the control comes in.  Let's take  a real life example and follow the flow of money through the loan.

In  February 08 I closed  an HOA loan for a young couple wh0 borrowed about $227,000 and had a net income of approximately $8,000.00 per month.  In addition they had  savings pattern of about 8% per month and had very  little credit card and  installment debt.  Now, keep your eye on the mortgage balance.

When the loan is closed your mortgage account becomes your checking account. In  the case above the couple received approximately $4000.00 semi monthly. On the first of the month $4000.00 is  directly deposited  to the mortgage/checking account. The $227,000.00 now becomes $223,000 and your interest is calculated  dailey on the  lesser amount. Remember,  your mortgage account and checking account are the same so you still have access to the $4000.00 you just deposited and by which you reduced your mortgage balance. The money stays in the account for 10 days and you now decide that you must pay some bills and  write checks for $3000.00.  Your balance is  changed to $226,000 and your interest is calculated dailey on that amount.

On the 15th of the month your paychecks are again directly deposited to your account and now your balance is reduced to $222,000.00 and this is  the amount on which your dailey  interest is calculated. On the  25th of the month you again  write checks for $3000.00 and get some spending money for you and our family with your debit card. Your balance pops back up to $225,000  and on the 1st of the next month your paychecks are deposited directly to the checking/mortgage account. The cycle starts all over again and is  essentially duplicated until the  loan is paid off. 

Let's examine what  you have accomlished  with this process. First, the money you did spend each month stayed in your checking/mortgage account before it was spent and kept your balance low,  reducing, interest cost and allowing more money to be applied to principle. Second  the money left over at the end of the month reduces your interest cost by showing up the next month in the form of a lower principle balance.    

By reducing interest costs and allowing principle to be paid even in just small amounts will greatly reduce the term of your loan and in some cases by as  much as 15  and 20 years. Reducing the  term reduces the  total interest cost if you  remember the example of the trianlge that  I used in last weeks blog..........and it is all done without refinancing ever because  you are using your own M O N E Y!

At the outset of  this post I stated this was a   real life example. I spoke to the client just yesterday.  Tonia told me they  had paid down their principle balance by $50,000 in just two years.   Two years and a reduction of $50,000 pretty freaking  awesome.  Others have had the same success and at this pace they will be mortgage debt free within just  6 or 7 years............. and they still have access to the $227,000 they originally borrowed for the next 24 years or until they close the account. They have just changed their banking relationship to the bank of ME.  

I hope  I have made this clear and you can  follow,  but if you can't here is a link that will explain the  HOA process in a five minute video presentation.  http://www.hoamovie.com/

Comments (1)

Sam White
College Station, TX
Integrated Marketing - Bryan College Station,

Thanks for the explanation and the link. Have a great day in Virginia Beach.

Jun 14, 2010 01:27 AM