Brief History:
Mortgage Acceleration is a concept that has been around for about 12 years. It has become fairly popular in New Zealand the UK and Australia. I have heard statistics that indicate as many as 30% of all mortgages in Australia utilize the Mortgage Acceleration Strategy.
Mortgage Acceleration; not to be confused with “Mortgage Elimination Scam”:
The Mortgage Elimination Scam of the early 80’s (may have been around longer and I am sure can be found today if you look hard enough on the internet) was a method were a home owner could contest the validity of the mortgage contract and actually have the contract voided and then get complete ownership on the property with out paying the mortgage. This scam cost many people there homes and/or a lot of money. Bottom line is if you borrowed the money for a mortgage, you most likely owe it.
The Market Place:
Today’s market place is a prime example of why Mortgage Acceleration is a good option. Setting a goal to be debt free from your mortgage and being able to establish some type of retirement account is what most people in this country need today. With Americans saving less then ever before in history, consumer debt in the trillions of dollars and just last month the foreclosure rate up 36% from the previous month (1 in 520 home owners in foreclosure), it seems to indicate that the American consumer needs to get back to basics; Paying off debt and creating saving for the future.
How does Mortgage Acceleration Work?
Mortgage Acceleration is process that minimizes interest expense on your home loan. In other words if you are currently in a 30 year mortgage at 6.5% and you are re paying the loan in the traditional manner then your interest cost is 6.5%. When you repay the loan using the Mortgage Acceleration Strategy your actual interest cost or interest expense is greatly reduced. In many cases depending on the variables your interest cost may only be 2% to 2.5%. This reduction in interest cost is accomplished by reducing the principle balance each month in your open end interest account (HELOC) that is used as the main tool to reduce your principle mortgage balance at strategic times during the life of the loan. This strategy in most cases will reduce the term of your primary mortgage by 2/3rds. Most of the clients I have worked with will save in excess of $100K and is some case $150K plus.
*All this can be accomplished with NO change in your current monthly expenditures.
Is Mortgage Acceleration good for everyone?
Not all clients can meet the minimal requirements to qualify for a Mortgage Acceleration Program. The basic requirements are; a specified amount of equity in your home (determined by analysis) as well as a good credit score. If you meet those requirements then the Mortgage Acceleration analysis should be closely reviewed to determine what the benefit are in savings and reduction of term for your specific mortgage loan.
What if I don’t quality for a Mortgage Acceleration Program?
Don’t worry. If you don’t qualify immediately do to equity position or credit score. There are programs that are designed to prepare you for the Mortgage Acceleration process. Two issues that need to be addressed are the equity and the credit score. Most programs out there today do not have a program in place to addressing these issues, you either qualify or you don’t, period.
The systematic approach to prepare a client for the Mortgage Acceleration is to attack all of the interest bearing personal debt first in a fashion that will minimize interest expense and reduce the pay off term, usually 1 to 3 years. That approach will usually fix any credit score related issues. Now we can apply the margin created through the pay off of the personal debt to increase your equity position so that the HELOC strategy can be put in place with in a few years. Now you will have the opportunity to pay off your mortgage in 8 to 12 years versus 30 years.
Why have we not heard of Mortgage Acceleration before?
This one is really pretty easy. Banks. Lenders, finance companies or what ever you choose to call them, earn there money on the interest they charge you and any other additional fees they can tack on to your loan. So you can see that it is really not in there best interest to make you aware of any method of repayment that will minimize there profit by reducing the interest cost or term of the loan. The longer you have the loan and the more interest you pay, the more profit they make.
As well we have been marketed to for years about how we can make the minimal payment and stay with in our budget and continue to borrow more and more. Most people today have no idea how much interest there paying on there debt or how long it will take them to pay it off. It is time to take responsibility for our individual financial wellbeing and stop allowing ourselves to be lead to the slaughter like sheep’s by the financial institutions.
For more information on Mortgage Acceleration and Personal Debt Elimination please contact:
Mark Bustamonte
Managing Partner
Tri-Star Consulting Group, LLC
www.tristarconsultinggroupllc.info
866-840-2240
Thursday, September 20, 2007
Tuesday, September 11, 2007
Debt Payoff: An Old Strategy Re-born
In this day an age of a “Market under Fire” consumers are inundated with all types of financial strategies encouraging them to stay on track with their credit and debt. While marketing firms for retail shops continue to create new ways to encourage the same consumers to spend smart. An interesting concept that these firms propagate is that we can save money while spending. An oxymoron of sorts seeing how you can’t save and spend at the same time… or can you?
Well, the fact is that we will always have expenses and certainly there are many strategies that can be used based on an individual’s specific situation. While there may not be a way to spend smart per say, there is a way to strategically spend whereby the consumer can create savings and retirement.
The newest strategy to hit the US market is the mortgage acceleration and debt elimination program. It is the paradigm between the need to spend and the desire to save. This program allows for the homeowner to create a checking account that combines the their mortgage and attributes from a credit card to accelerate the time it takes to payoff their mortgage as well as other interest bearing accounts. The mortgage acceleration and debt elimination programs provide consumers a great mathematical formula in a software base where the user can simply plug in the debts, payment dates, interest rates, etc. of their current debts to find an exacted date of debt payoff.
These mortgage acceleration plans can cost from $3,000 to $6,500. A combination of both mortgage acceleration and debt elimination plans can find the consumer paying in the upwards amount of $12,500. Seemingly costly however, if consumers consider that by enrolling in a program they will save on average $150,000 in interest payments. The initial cost is truly minimal and often times, is captured through some type of financing agreement so that the cost to consumers is not “felt” during the program progression.
As good as these programs are there are still questions as to who can these programs help. The answer is everyone however the limitations for most providers is that since the mortgage acceleration product requires some type of Home equity loan or line of credit, only those with a favorable credit score (that being defined as a 680 middle score or above) can qualify for the mortgage acceleration programs.
So these programs are great but unfortunately limited in scope for most. But where there is a will there is a way…
I will address some of these concerns and possible solutions in the next commentary.
Brian Green
Tri-Star Consulting Group, LLC
Managing Partner
http://www.tristarconsultinggroupllc.info
1-240-354-8817
Well, the fact is that we will always have expenses and certainly there are many strategies that can be used based on an individual’s specific situation. While there may not be a way to spend smart per say, there is a way to strategically spend whereby the consumer can create savings and retirement.
The newest strategy to hit the US market is the mortgage acceleration and debt elimination program. It is the paradigm between the need to spend and the desire to save. This program allows for the homeowner to create a checking account that combines the their mortgage and attributes from a credit card to accelerate the time it takes to payoff their mortgage as well as other interest bearing accounts. The mortgage acceleration and debt elimination programs provide consumers a great mathematical formula in a software base where the user can simply plug in the debts, payment dates, interest rates, etc. of their current debts to find an exacted date of debt payoff.
These mortgage acceleration plans can cost from $3,000 to $6,500. A combination of both mortgage acceleration and debt elimination plans can find the consumer paying in the upwards amount of $12,500. Seemingly costly however, if consumers consider that by enrolling in a program they will save on average $150,000 in interest payments. The initial cost is truly minimal and often times, is captured through some type of financing agreement so that the cost to consumers is not “felt” during the program progression.
As good as these programs are there are still questions as to who can these programs help. The answer is everyone however the limitations for most providers is that since the mortgage acceleration product requires some type of Home equity loan or line of credit, only those with a favorable credit score (that being defined as a 680 middle score or above) can qualify for the mortgage acceleration programs.
So these programs are great but unfortunately limited in scope for most. But where there is a will there is a way…
I will address some of these concerns and possible solutions in the next commentary.
Brian Green
Tri-Star Consulting Group, LLC
Managing Partner
http://www.tristarconsultinggroupllc.info
1-240-354-8817
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