Home Ownership Accelerator

I stumbled across a new type of mortgage several months back called a Home Ownership Accelerator that claimed it could help you increase your equity quicker by combining your checking account with your mortgage. I thought this was an interesting idea so I did some more research.

The Home Ownership Accelerator is offered by a company called CMG Mortgage and based on a product that is common in Australia and the UK. The basic idea is that you combine your mortgage and your checking account and by depositing your paycheck into your checking/mortgage account, your paycheck acts as a payment towards your mortgage principal and acts as an equity accelerator. You then use the same account to pay all your monthly bill. At the end of the month the Home Ownership Accelerator calculates interest based on the average daily balance of the principal and then adds the interest charge to your mortgage balance.

Advantages of the Home Ownership Accelerator

There are several advantages to this type of set-up. For one, you never technically make a "mortgage payment." You simply deposit your paycheck and then use the account as your normal checking account and the Home Ownership Accelerator does the rest. Keep in mind you must have direct deposit from your employer in order to utilize the Home Ownership Accelerator, but for most people, this probably isn't a problem. If you do not have direct deposit through your employer, you can contact the Home Ownership Accelerator company and advise them that you have physically deposited your paycheck into your personal bank account (make sure the check has cleared), and then tell them to "go get it", and they can make the transfer for you.

By depositing your paycheck into the Home Ownership Accelerator, you are able to have the advantage of having your entire paycheck amount applied as a principal payment. This is great because as most people know, at the beginning of a normal mortgage, very little of your payment is actually applied towards the principal. With the Home Ownership Accelerator, the entire payment goes to principal, and since the payment decreases your mortgage balance by a large amount, the interest that is charged is less because the interest is based on the average daily balance.

What about your monthly bills, you may ask. You maximize the benefits of this payment program by making all or most of your payments at the very end of the month (even if it is for the following month - if you are unable to change your present "due dates"). Then, you are still using your paycheck just the way you are accustomed and also getting the benefits of the interest being calculated based on your daily balance.

If only I had the 20% equity that this type of loan required when it was first introduced here in Florida. I'd be in so much better shape right now!