Mortgage Payoff: It Can Happen Sooner Than You Think

As a Mortgage Banker and financial professional the past decade has been more than interesting.  Our country has witnessed an entire lifetime’s worth of financial rise and decline in just the past 10 years.  We’ve gone from the “borrow as much as you can while the money is cheap” strategy, to the “deleverage yourself, stay in for dinner and lead a simpler life” mantra.  The Federal Reserve tracks the nation’s personal savings rate (PSR) and has duly noted that we have come a long way since the turn of the century.  Nationally, our PSR has come up to about 6.75% this year from the roughly 3.75% we saw in 2000 and the ever depressing 2.5% we saw in 2005.  In addition, most families are also making a concerted effort to reduce their personal household debt.  Our national household debt service ratio, which includes everything from home loans to credit card debt, has dropped by 20% over just the past 5 years.  Clearly a change in mindset has occurred in this country.  Now more than ever people are conscious of what they are spending and how they are borrowing. 

An important piece to focus on here is mortgage debt.  It’s no secret that the mortgage crisis is what put the U.S. in a tail spin in 2008.  If we look back to the years immediately prior to the crisis we remember that there were some very sophisticated financial tools being made available to anyone who could fog a mirror.  Stated income loans, negative amortization loans, zero down adjustable interest only loans…just to name a few.  Families today want a smart and efficient way to borrow.  They don’t want to put all of their eggs in the same basket, but also don’t want to leverage to a point where they are unable to sleep at night.  Most banks and financial institutions have trimmed back their product offerings and have thrown creativity right out the window (along with logic).  While this may be true with most financial institutions, it is not the case with a local California mortgage company, CMG Mortgage, Inc.

CMG Mortgage and its partner, Ameriprise Bank, FSB are offering a mortgage product that is not only intriguing, but is also changing the way families manage their finances.  Their product is known as “The Home Ownership Accelerator®” and has had success since entering the market in 2005.  Contrary to the everyday conventional mortgage, the goal with the accelerator loan is to pay as little in interest as you possibly can.  In fact, the loan is actually designed so that you pay principal first.

The Home Ownership Accelerator breaks with mortgage tradition by giving the borrower the power to reduce debt more aggressively without changing their spending habits. Traditional mortgages make it easy to get into debt, but do not offer a solution to help manage the debt down. The Home Ownership Accelerator helps reduce debt more quickly simply by putting the borrower’s personal income to better use all while keeping it liquid and just as accessible as with a traditional checking account.

The concept is innovative, yet surprisingly simple.  The Accelerator combines all of your checking, savings, home loan and home equity line accounts into one master account that automatically “sweeps” all deposited cash against the loan balance each day in order to save mortgage interest. This simple change makes much better use of your cash flow, potentially saving you tens and maybe hundreds of thousands of dollars in interest. 

Today’s economy reminds us daily that we need to trim the fat and manage our finances as efficiently as possible.  Home loans are typically a household’s largest liability.  At the same time, checking accounts tend to be the main artery to our finances.  Consider the amount of money you have moved through your checking account over the past decade.  Now, imagine if that money was used to offset your mortgage balance even if it remained idle for just a short period of time.   Merging these two accounts together(checking & mortgage)  makes for a flexible and efficient combination potentially saving homeowners huge amounts of interest.

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