Tuesday, February 12, 2008

Home Ownership Acclerator -Helpful or Not

I am excited about researching this brand new concept to me. Paying down your mortgage in a unique way using Home Ownership Acclerator or a Money Merge Account from United First Financial.
The Home Ownership Acclerator appeared very interesting until I hit upon one of the FAQ.

"4. What is my “credit line”?
Your credit line is the maximum amount you can borrow under the terms of the agreement. This is usually higher than your first draw amount, which will typically be used to pay off an old mortgage (in a refinance) or complete a purchase transaction. Your credit line will remain the same throughout the 10-year interest-only period, and then it will decline by 1/240 per month throughout the subsequent 20-year repayment period, reaching zero at the end of the 30-year term. You’ll need to keep your principal balance below this line throughout the term of the loan, meaning that you’ll at least need to be making progress against paying down principal during the final 20 years."
http://www.myhoamortgage.com/FAQS.htm.

The interest only portion of 10 years is what has me questioning.

Oh well, I guess back to the drawing board. What seemed very interesting is that using this Home Ownership Accelerator your funds (such as your paychecks) are deposited into an account to reduce your daily balance which in effect reduces your daily interest owed on your mortgage.

Next idea is the Money Merge Account from United First Financial. This software program cost $3500. You also need to get a Advanced Line of Credit to utilize this mortgage paydown method.
http://thejubileeproject.com/learn--index/learn-indepth-index/in-depth--how-it-works-together.htm.

Call in from Dave Ramsey's show
call regarding Money Merge Accounts.
http://www.daveramsey.com/etc/askdave/?intContentId=8082

1 comment:

dlbough said...

What is it about the interest-only period that has you questioning? I can see where that can be a little confusing. So, I'll try to explain it a little better. Basically, during the first ten years, the only thing that you are obligated to satisfy is the monthly interest charge. This is only your minimum obligation. However, for people with good positive cash flow who deposit all of their income against the mortgage balance, the end result is that the balance is aggressively reduced with each deposit. The advantage to regular prepayments on a traditional mortgage is that you still have access to the equity for emergencies and everyday spending.

In conclusion, interest-only means that all you are obligated to satisfy is the monthly interest charge but, if you've been funnelling all of your cash through the loan, this obligation is usually met by the bank automatically adding the charge to your loan balance. There is no set payment unless you max out your credit line. Did that help at all?

Derek