Why the Home Ownership Accelerator® works? ™
Depository Power™
The power of your checking account running through the Home Ownership Accelerator® reduces the daily balance, therefore reducing the interest you owe.
The Line of Credit allows 24/7 access so you save future refinancing costs. You can still access your money when you need to.
The power of the Monthly Libor allows you to benefit by borrowing near where the bank does. See how the Monthly Libor mirrors the Federal Funds rate. You can fund outside investment opportunities too!
No more is the depository power and benefits of your checking account de-coupled from your home mortgage. The power of the fully-functioning, embedded checking account is in your hands. You decide if paying off your home faster is your goal. You decide if using your home is the vehicle to fund wealth building is your goal. You decide!
Contributed by: Doug Nesbit, CMG
Tuesday, April 8, 2008
Wednesday, April 2, 2008
HOA - Myths & Conceptions
As with any new innovation, you must break through the confusion and competitive clutter to find the truth about the product you are considering. Some myths and misconceptions have already grown up around the Home Ownership Accelerator, and I would like to clear them up for you.
Myth #1: You can match the performance of the Accelerator by pre-paying your current mortgage.
Myth #2: Ordinary spending becomes long-term debt through the Accelerator
Myth #3: An adjustable interest rate is too risky
Myth #4: The starting interest rate is higher on the Accelerator
Myth #5: You have to put all your savings in the loan to make it work
Myth #6: Consumers have little discipline so access to home equity is too tempting to abuse.
Myth #7: Better to get a low-rate mortgage and invest extra income.
________________________________________
Myth #1: You can match the performance of the Accelerator by pre-paying your current mortgage. TRUE
Paying extra each month, making an extra annual payment or adopting a bi-weekly payment plan will all reduce your loan term and save you interest. The fact is that most consumers surveyed about pre-paying their current loan, do not follow through:
• Pre-paying locks up the funds permanently, unless you refinance or use a home equity line of credit to get it back. If you sign up for a bi-weekly payment plan, you are also locking yourself into 26 annual payments, further restricting your flexibility
• You would never put all your spare cash against your mortgage, even if you did pre-pay it.
The Accelerator maximizes your pre-payments and interest savings because it allows you to:
• Flow every spare dollar you have against your loan balance until you need it for bills or investments.
• Withdrawal it immediately in the event of emergencies or investment opportunities.
No other loan offers such flexibility and financial power. This loan is a home equity line of credit that allows unlimited payment and withdrawal privileges. No fixed monthly payment is required if you are below your line's credit limit. Conversely, you can deposit every dollar you earn into the account until you need the funds for bills or long-term investments. Bi-weekly payment plans are attached to traditional mortgages to increase pay-down speed, but they offer no withdrawal privileges and lock you into a strict series of payments.
________________________________________
Myth #2: Ordinary spending becomes long-term debt through the Accelerator. FALSE
This myth grew out of the fact that you pay all of your bills from your Accelerator account to maximize the value of your cash. However, your monthly incoming cash flow more than offsets your monthly bills, so your balance trends down, not up. If you did not deposit your monthly income into the account and still used it to pay bills, your balance would increase. So, I do not recommend this loan for people with negative monthly cash flow because we don't want ordinary spending to drive up long-term debt.
________________________________________
Myth #3: An adjustable interest rate is too risky. FALSE
The total cost of a loan is driven by rate, balance and term. A higher-rate loan will cost less than a low rate loan if you reduce the balance quickly. Also, adjustable rates may be more volatile than fixed rates, but you pay a premium for the security of the fixed rate. Over time, adjustable rates usually match or beat the performance of fixed rates. So, deciding not to take out the Accelerator solely because it has an adjustable rate is making a long-term decision on a short-term consideration. You need to analyze the full picture before deciding.
________________________________________
Myth #4: The starting interest rate is higher on the Accelerator. IT DEPENDS
First, you have a range of margins available on the Accelerator. If you buy down that margin to .75%, your starting interest rate might be very competitive with today's fixed rate products. Second, this loan focuses on balance reduction instead of interest rate. If you have the cash flow and/or reserves to attack your balance aggressively, the interest you save will more than make up for the jump in your starting interest rate. Third, the Accelerator is tied to the 1-month LIBOR index, which is currently above its historic mean. That means it is as likely to drop as it is to rise over the next few years. So your current rate may be higher than your current loan, but adjustable rates go down as well as up, and you may end up with a better rate on the Accelerator over time.
________________________________________
Myth #5: You have to put all your savings in the loan to make it work. FALSE
We recommend that you put your savings to the best possible use. Checking account balances and emergency funds kept in CDs usually earn less than your loan's interest rate, so it makes good financial sense to move those funds into the Accelerator. But, if you can earn a better return investing your savings elsewhere, it makes no sense to leave the funds in the Accelerator. Plus, whenever you have cash reserves earning less than your current interest rate, even temporarily, it would make sense to deposit them into the Accelerator to reduce what you owe and save interest until you find a better investment opportunity.
________________________________________
Myth #6: Consumers have little discipline so access to home equity is too tempting to abuse. FALSE
I give my clients more credit than that. I offer the Home Ownership Accelerator to people with excellent credit and positive cash flow. They already exhibit a strong ability to manage credit. In fact, I have not seen any change in the financial behavior of the thousands of people who have already adopted the Accelerator. Indeed, Accelerator clients report that the cash flow benefits of this product induce a more conservative approach, because every dollar saved now has a powerful impact on debt reduction. Finally, I know that good-credit people already receive endless offers from credit card sellers and bank peddling traditional equity lines of credit. We are not giving our clients equity access that they don't already have.
________________________________________
Myth #7: Better to get a low-rate mortgage and invest extra income. FALSE
The fact is you can do both. If your goal is not to pay down your mortgage debt until you retire, you can still use the Home Ownership Accelerator to maximize the power of your cash flow before you invest it (income flows into this account, saving interest, until a good investment opportunity arises), or in between investments as an extremely powerful sweep account. And, as you approach retirement and begin to rebalance your portfolio, the relative return on the Accelerator may complement your overall strategy even more. Finally, when you do retire, you may still cash out investments and pay down your home loan. But, with the Accelerator, you can pay down the balance without closing the line, so you can still support long-term investment plans well into retirement.
Myth #1: You can match the performance of the Accelerator by pre-paying your current mortgage.
Myth #2: Ordinary spending becomes long-term debt through the Accelerator
Myth #3: An adjustable interest rate is too risky
Myth #4: The starting interest rate is higher on the Accelerator
Myth #5: You have to put all your savings in the loan to make it work
Myth #6: Consumers have little discipline so access to home equity is too tempting to abuse.
Myth #7: Better to get a low-rate mortgage and invest extra income.
________________________________________
Myth #1: You can match the performance of the Accelerator by pre-paying your current mortgage. TRUE
Paying extra each month, making an extra annual payment or adopting a bi-weekly payment plan will all reduce your loan term and save you interest. The fact is that most consumers surveyed about pre-paying their current loan, do not follow through:
• Pre-paying locks up the funds permanently, unless you refinance or use a home equity line of credit to get it back. If you sign up for a bi-weekly payment plan, you are also locking yourself into 26 annual payments, further restricting your flexibility
• You would never put all your spare cash against your mortgage, even if you did pre-pay it.
The Accelerator maximizes your pre-payments and interest savings because it allows you to:
• Flow every spare dollar you have against your loan balance until you need it for bills or investments.
• Withdrawal it immediately in the event of emergencies or investment opportunities.
No other loan offers such flexibility and financial power. This loan is a home equity line of credit that allows unlimited payment and withdrawal privileges. No fixed monthly payment is required if you are below your line's credit limit. Conversely, you can deposit every dollar you earn into the account until you need the funds for bills or long-term investments. Bi-weekly payment plans are attached to traditional mortgages to increase pay-down speed, but they offer no withdrawal privileges and lock you into a strict series of payments.
________________________________________
Myth #2: Ordinary spending becomes long-term debt through the Accelerator. FALSE
This myth grew out of the fact that you pay all of your bills from your Accelerator account to maximize the value of your cash. However, your monthly incoming cash flow more than offsets your monthly bills, so your balance trends down, not up. If you did not deposit your monthly income into the account and still used it to pay bills, your balance would increase. So, I do not recommend this loan for people with negative monthly cash flow because we don't want ordinary spending to drive up long-term debt.
________________________________________
Myth #3: An adjustable interest rate is too risky. FALSE
The total cost of a loan is driven by rate, balance and term. A higher-rate loan will cost less than a low rate loan if you reduce the balance quickly. Also, adjustable rates may be more volatile than fixed rates, but you pay a premium for the security of the fixed rate. Over time, adjustable rates usually match or beat the performance of fixed rates. So, deciding not to take out the Accelerator solely because it has an adjustable rate is making a long-term decision on a short-term consideration. You need to analyze the full picture before deciding.
________________________________________
Myth #4: The starting interest rate is higher on the Accelerator. IT DEPENDS
First, you have a range of margins available on the Accelerator. If you buy down that margin to .75%, your starting interest rate might be very competitive with today's fixed rate products. Second, this loan focuses on balance reduction instead of interest rate. If you have the cash flow and/or reserves to attack your balance aggressively, the interest you save will more than make up for the jump in your starting interest rate. Third, the Accelerator is tied to the 1-month LIBOR index, which is currently above its historic mean. That means it is as likely to drop as it is to rise over the next few years. So your current rate may be higher than your current loan, but adjustable rates go down as well as up, and you may end up with a better rate on the Accelerator over time.
________________________________________
Myth #5: You have to put all your savings in the loan to make it work. FALSE
We recommend that you put your savings to the best possible use. Checking account balances and emergency funds kept in CDs usually earn less than your loan's interest rate, so it makes good financial sense to move those funds into the Accelerator. But, if you can earn a better return investing your savings elsewhere, it makes no sense to leave the funds in the Accelerator. Plus, whenever you have cash reserves earning less than your current interest rate, even temporarily, it would make sense to deposit them into the Accelerator to reduce what you owe and save interest until you find a better investment opportunity.
________________________________________
Myth #6: Consumers have little discipline so access to home equity is too tempting to abuse. FALSE
I give my clients more credit than that. I offer the Home Ownership Accelerator to people with excellent credit and positive cash flow. They already exhibit a strong ability to manage credit. In fact, I have not seen any change in the financial behavior of the thousands of people who have already adopted the Accelerator. Indeed, Accelerator clients report that the cash flow benefits of this product induce a more conservative approach, because every dollar saved now has a powerful impact on debt reduction. Finally, I know that good-credit people already receive endless offers from credit card sellers and bank peddling traditional equity lines of credit. We are not giving our clients equity access that they don't already have.
________________________________________
Myth #7: Better to get a low-rate mortgage and invest extra income. FALSE
The fact is you can do both. If your goal is not to pay down your mortgage debt until you retire, you can still use the Home Ownership Accelerator to maximize the power of your cash flow before you invest it (income flows into this account, saving interest, until a good investment opportunity arises), or in between investments as an extremely powerful sweep account. And, as you approach retirement and begin to rebalance your portfolio, the relative return on the Accelerator may complement your overall strategy even more. Finally, when you do retire, you may still cash out investments and pay down your home loan. But, with the Accelerator, you can pay down the balance without closing the line, so you can still support long-term investment plans well into retirement.
Monday, March 31, 2008
HOA - What Is It?
What is the Home Ownership Accelerator?
The concept is surprisingly simple: The Accelerator combines all your checking, home loan and home equity line accounts into one master "loan sweep account" that automatically transfers all deposited cash against the loan balance each day in order to save mortgage interest. That's it! This simple change better leverages your cash flow, potentially saving you thousands in interest over the next decade. And, your funds remain available 24/7, just like with your old checking account today.
The Accelerator could save you thousands in interest payments...
The Home Ownership Accelerator breaks with mortgage tradition by giving you, the borrower, the power to reduce your debt more aggressively. Traditional mortgages make it easy to get into debt, but offer no tools to help you manage the debt down. The Home Ownership Accelerator does help reduce debt more quickly, simply by putting all your personal income to better use.
The concept is surprisingly simple: The Accelerator combines all your checking, home loan and home equity line accounts into one master "loan sweep account" that automatically transfers all deposited cash against the loan balance each day in order to save mortgage interest. That's it! This simple change better leverages your cash flow, potentially saving you thousands in interest over the next decade. And, your funds remain available 24/7, just like with your old checking account today.
The Accelerator could save you thousands in interest payments...
The Home Ownership Accelerator breaks with mortgage tradition by giving you, the borrower, the power to reduce your debt more aggressively. Traditional mortgages make it easy to get into debt, but offer no tools to help you manage the debt down. The Home Ownership Accelerator does help reduce debt more quickly, simply by putting all your personal income to better use.
- Your income lowers your monthly balance.
- The lower balances saves you interest.
- The saved interest becomes extra principal payment.
- This further lowers your balance, saving more interest.
- This freed up even more money to reduce principal.
- This cycle repeats itself each month, compounding your interest savings and accelerating the reduction of your mortgage.
Why is saving interest so important?
Whether or not you want to pay your mortgage off more quickly, owing less money over time will save you interest charges. How? It's not magic, it's just math: And, the Accelerator will simplify your life!
Combining your main personal cash management tools into one master account relieves you of the need to track money transfers manually. Once the account is set up, transfers to and from your loan account occur automatically. So do your interest savings from your positive cash flow. And when you need cash for investments or expenses, it is quickly available via check, electronic transfer or ATM withdrawal. Nothing could be simpler.
Discover how the power of your own cash flow could significantly accelerate your home loan's pay down, saving you thousands in interest and getting you free-and-clear of mortgage payments years ahead.
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