Mortgage Accelerator as a Budgeting Tool

Semi-retire@50 · #1 (**permalink**) 03-22-2008, 11:04 AM

Hi All,

I'm new to this web site but I've read a lot of the helpful discussions in site. I topic I haven't read is about Mortgage Accelerator. To those who are not familiar w/ this, it is where you use your HELOC like you would your checking account. You deposit you paycheck to your HELOC and use your HELOC to pay for all your bills and expenses. There are financial institutions that actually manage this programs, but anyone with a HELOC tied to their bank account can do it themselves. The financial institutions that manage these Accelerated mortgage actually charge you for the software they sell for $3500 to help you manage your Accelerated mortgage. But with excel and a good understanding of how you HELOC works, you don't need to pay for $3500.

I think this program is acctually a great budgeting tool because it lets you see how your money works for YOU down to every penny of it. Everytime you save money in your monthy budget it shows you how many months you save before you payoff your mortgage. I use to just pay additional principal on what I think I can add and i usually avg about $800 additional principal. But by doing the AM I'm finding myself sometimes putting in $5000 additional principal on some months.

Has anybody every use this plan?

Semi-retire@50

jIM_Ohio · #2 (**permalink**) 03-22-2008, 12:06 PM

I think you would need to show specific ways this helps to get more comments on it.

Semi-retire@50 · #3 (**permalink**) 03-22-2008, 01:46 PM

Sorry I would post a link but I guess I need to post 15 times before this site allows me. But go to google and search for United First Financial and that should explain the Accelerated Mortgage program.

I don't endores United First Financial because like I said you can do this yourself. United First Financial claims that they have a special software that calculates to maximize your payments. The is probably such a thing but I doubt it will save you $3500 (the price of the software). Doing it your self and transfering money when your bill is due will do just fine.

Now this is not for everyone. You need to have a positive cash flow every month because if you don't you will only go into deeper debts. I think the full benefit of this is that you are not waiting at the end of the month to find out what you save for that month and then put that savings in your mortgage. This plan lets your savings work for you right away and reduces your Daily Average Balance of your loan [the only variable you can control in calculating your monthly mortgage interest - DAB x rate x (days/365)]. Plus it make you conscious of your spending because you can only pay using your HELOC.

Like I said its not for everyone, but if you are looking to pay off your mortgage in the lease possible time, I think this is the best plan out there. Other than winning the lottery of course

maat55 · #4 (**permalink**) 03-22-2008, 02:02 PM

Truthfully, the only way to pay down your mortgage faster is to pay more on it. Any other system is a useless scam. You can make a budget and take the savings to do the same thing. There's no majic wand, you just have to want to pay it down, and do it.

jimmyengland · #5 (**permalink**) 03-24-2008, 12:07 PM

as far as I have seen with the mortgage accelerator with my mortgage company all this basically is is that they take payments in two week periods vs paying your regular monthly bill. e.g.

700 per month (8400 per yr) regular or 370 every two weeks (9620 per yr). Basically all they are doing is paying extra money to the mtg (which you can do easily yourself). Plus with my mortgage company they charge a one time initial fee plus a small monthly charge. All you have to do is pay extra by yourself and not incur the fees. However if you do not have the ability to be able to save the extra money and like the conveinience of someone taking care of it for you then I guess this could be a good plan for you. However for me this is a no brainer and doesn't make much sense.

noppenbd · #6 (**permalink**) 03-24-2008, 12:19 PM

Quote:

Originally Posted by maat55

Truthfully, the only way to pay down your mortgage faster is to pay more on it. Any other system is a useless scam. You can make a budget and take the savings to do the same thing. There's no majic wand, you just have to want to pay it down, and do it.

This is the truth. There really is no free lunch.

Also, in other threads we have discussed that paying down your mortgage quicker is not necessarily the best use for extra cash. Best to just pay it on time and use excess funds for specific savings goals (retirement, emergency fund, etc).

maat55 · #7 (**permalink**) 03-24-2008, 04:15 PM

Quote:

Originally Posted by noppenbd

This is the truth. There really is no free lunch.

Also, in other threads we have discussed that paying down your mortgage quicker is not necessarily the best use for extra cash. Best to just pay it on time and use excess funds for specific savings goals (retirement, emergency fund, etc).

I agree,

Paying additional on your mortgage is useful only after you have payed off all other debt, fully funded any 529's, Roth's, 401's etc.

StressLess · #8 (**permalink**) 03-25-2008, 06:45 AM

I can't see any reason to bring a HELOC into it. I can make extra principal payments any time on our mortgage. Also, I can set it up so an extra amount of my choice goes toward principal every month. No fees for either way.

Also, apparently banks can cancel HELOCs when they see fit, if your circumstances or credit rating change. I just read a blog entry where someone was counting on the HELOC as their emergency fund. When they actually had an emergency--unemployment--the bank pulled it out from under them because of the emergency.

Slug · #9 (**permalink**) 03-25-2008, 07:23 AM

I too am dubious of these mortgage accelerators. I think most of the folks on this board are so in tune with their finances and willing to micro-manage the details that such a plan is less appropriate for them.

aida2003 · #10 (**permalink**) 03-25-2008, 08:49 AM

No need of special software or any company offering an AM. I am sceptical about that. All you need is extra money to make additional principal payments. The biggest argument on this board or anywhere else whether it's worth it financially. Financially probably not, but emotionally might be....all depends on an individual.

Merch · #11 (**permalink**) 03-25-2008, 10:10 AM

In most of these programs, you are trading in a low fixed rate mortgage into a variable rate line of credit and paying $3,500. So I have a $300k mortgage at 5.5% or 6%, I could get a $100k HEOLC at what 6.5% or 7%, which could be adjusted. I don't think that's the smart way to go.

I better approach is to lock down a budget and pay extra on a monthly basis as the budget permits. The budget is the linchpin to any of this.

Here is a calculator that does that complicated math. Real Estate Center

I do like the idea of paying the mortgage off early. I don't think people have the discipline to let an investment sit around for 25-30 years without using it for something (new car, remodeling, college, second home). I think a better way to build wealth for the average person is to pay of the home mortgage which will directly increase net worth, free cashflow, and force a person to live below there means.

This stuff takes discipline and there is no magic bullet.