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This company came in to my office the other day soliciting a new loan program. Supposedly, you can take out a LOC on your home and somehow pay your bills like normal through the line of credit. Any money left over at the end of the month will be applied to the principle balance. Instead of making the same payment monthly for less time as more is applied to principle, the monthly payment goes down and you pay for the full period of time on the loan. Any ideas on how this is beneficial or detrimental? Thanks.
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We've talked about this at my office.... The biggest thing is that the rate resets every month. So if we get into a long period of rising interest rates, less payment is applied to principal. Interesting concept, but in the long term it might not be that great of a program. I would rather someone take a 5/1 or 7/1 nterest only arm and take the payment difference between that rate and a 30 year fixed rate and either apply that to principal of your loan or invest it. You will come out farther ahead with this strategy.
Like WNC said - my opinion is that the program is a waste of money. The concept works and can help people pay their loan down faster (if that's what they want to do). However, if you have a disciplined borrower you can show them how to do it easily with Excel and save the money. If your borrower isn't disciplined, then spending the money on the program is a waste because they won't follow it anyway and will take advantage of the LOC to spend more than they should.
You can do this yourself: get a line of crecit against your house, pay all your bills from it and pay all your extra cash to your mortgage... for FREE!
Furthermore, instead of buying this nonsense program, pay the $3500 direct to your principal...in 25 years, that 3500 initial payment to your loan, will save you 16,630... at 6%...
Oh no!!! Another kool-aid drinker....I think some of the guys saved the links for our multiple conversations about this. Long story short...don't waste your money or waste your clients money to something you can provide for free...
Thats what i was just thinking E---When a question have been gone through a hundred times and answered 10k times we should just link to the old thread and let it be.
This is what they call the 'mortgage accellertor' loan. They were pushing software a while back to monitor your finances.
I was against the software (which went for anywhere up to $3500) .
My suggestion was to simply get a HELOC and dump your paychecks on it. The logic being that if you bring in more than you spend, you will reduce your mortgage balance the quickest.
However, if the lender cuts off your HELOC spending line, or rates skyrocket, it doesnt work.
And paying a mortgage down takes one or 2 decades. Within that time period you can expect some fairly severe rates swings.
I would suggest simply applying extra money per month to principal and keep your 30 year fixed.
Thanks for the replies. I didn't look through the old threads. My bad. I figured it was more kool-aid, I just didn't know how it stacked up. Thanks again.
MRice-It's been a little while since we've seen a thread about this but we've talked about it several times. There are probably several supporters lurking that might respond differently but I suspect most of the board is against them.
I researched this a while ago after being aproached to sign up for the $3500 version.
For anyone seriously consider any of the mortgage accelerator programs .....Go direct to the source. The originator, Harj Gill, is from Australia. He is now promoting the "Speed Equity System" in the US. A Denver brokerage advertises it here because they have an exclusive territory (purchased rights).
Bottom line, the program sells for only $299 not the $3,500 charged by the knock-offs. This will work for very disciplined people. However, as stated in several threads, a perso can do this for themselves without the use of the special pograms. Brokers may promote this because they can do the HELOC for you that is required to make the system work.
Put that $3500 to work in btter places ....... :)
Its like buying a piece of workout equipment on one of those infomercials. Guaranteed great abs if you use their product ALONG with a healthy diet and exercise. The problem most people have is with the healthy diet and exercise which means no piece of equipment is going to help. Most people dont have the money or discipline to make the extra payments. If they did, they wouldnt need the "program." Same concept.
azrob boils down the program exactly...don't need to pay anyone anything for it; it's free information. Just use discipline and a heloc, and you can accelerate your debt paydown. I'm actually using it for my law school debt and have knocked off $30k in four months. Not bad, right?!
Not bad at all John. The ONLY way it works is you must have EXTRA income that provides CASH FLOW. Two thumbs up!
ugh... garbage... Plain and simple.
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