Mortgage Accelerator Loans

I find mortgage and other financial service products offered in foreign countries fascinating. The "Mortgage Accelerator" product offered in Australia and the UK is a great example.

With this product, a borrower deposits each paycheck against his home equity line of credit. He then withdraws from his line of credit all living expenses. The advantage is in the fact that interest on a HELOC (Home Equity Line of Credit) is calculated daily, so any reduction in the balance, even a temporary one, equals less interest.

Example:

You have a 30yr fixed rate mortgage at $4000 monthly payment. Your monthly paycheck is $10000. Even if you spend all of the $6000 difference, your average monthly balance is $3000 for the month than it was with a regular mortgage. At 7.75% that is a savings of $20 per month. $20 monthly savings alone may not be impressive enough. The real power of the product comes when you actually earn more money than you spend each month, ie. positive monthly cashflow. Apply that to your monthly balance automatically and shorten or "accelerate" the reduction of your mortgage balance.

CMG Financial Services offers the product in the US and provides a similator of the accelerator benefit.