Accelerate Your Home Ownership

Mortgage and Lending with US Financial Mortgage


  Accelerate Your Home Ownership

  US Financial Mortgage has just introduced a brand-new mortgage called the Home Ownership Accelerator that could 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 4% profit on your cash. By combining a checking account with a mortgage, you take the bank out of the equation and keep that 4% 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 unlimited 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 pay your bills. If you pay your bills at the end of the month, you could save up to 30 days of interest charges on the amount of your paycheck.

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. (See graph #2 on page 3.)

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:

  1. 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.  
  2. 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.
  3. 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.

What's the catch?

There are some differences between the Home Ownership Accelerator and the loan you may currently have:

  1. This loan is not a fixed-rate loan. It is a home equity line of credit (HELOC) with an adjustable interest rate. The interest rate is tied to the 1-month LIBOR financial index.
  2. This loan has a slightly higher margin (the fixed portion of an adjustable interest rate that provides the lender its profit) and a small annual fee to cover operational expenses.

On balance, however, the benefit of saving 5-6% on the cash you park in your Accelerator account should far outweigh the additional expense of the fee and the higher margin.

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 haven't already talked to us about this exciting new loan program, call to set up a time to discuss it in more detail.

Comments (1)

Fred Griffin Florida Real Estate
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

  We invite you back to ActiveRain in 2017. 

  We would welcome your return!

Sep 22, 2017 06:51 PM