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Has anyone here heard of The One Account? It's something started by a European company that a co-worker told me about. He's doing it pretty successfully, and I was wondering if anyone here had any opinions about it. It's supposed to pay off a 30-year mortgage much faster and give you more financial flexibility.
Here's how it's supposed to work:
1. You open a home equity line of credit for the entire value of your mortgage (he says that when he was shopping around, several banks were willing to do this).
2. You pay off your mortgage with your line of credit.
3. Any income you earn each month is deposited into the line of credit as a payment.
4. You use a credit card throughout the month for all of your purchases (or get the bank to link a debit card to the line of credit).
5. Pay off the credit card balance at the end of the month with the line of credit.
The idea is that the balance of the line of credit at the end of the month has been reduced by the amount you would normally pay into your mortgage, plus any savings you would have left over. In addition, the balance used to calculate interest will be lowered by your entire paycheck.
For example, let's say you had a $125,000 balance on the line of credit and you get paid $3000 per month. Your normal mortgage payment is $750 per month and you usually have $250 left over in savings (I'm just using easy numbers). On the first of the month, $3000 would be deposited into the line of credit, reducing the balance to $122,000. You would use a credit card throughout the month for everything, and on the last day of the month, you would withdraw $2000 from the line of credit to pay off the credit card. The balance at the end of the month would be $124k + interest, which would be calculated on the balance of $122k which was maintained for the entire month. If you needed that $250 for something, you could just withdrawal it from the line of credit. In fact, my co-worker says that since a payment is technically made each month, you can effectively "skip" a mortgage payment if a big emergency comes up.
Here's how it's supposed to work:
1. You open a home equity line of credit for the entire value of your mortgage (he says that when he was shopping around, several banks were willing to do this).
2. You pay off your mortgage with your line of credit.
3. Any income you earn each month is deposited into the line of credit as a payment.
4. You use a credit card throughout the month for all of your purchases (or get the bank to link a debit card to the line of credit).
5. Pay off the credit card balance at the end of the month with the line of credit.
The idea is that the balance of the line of credit at the end of the month has been reduced by the amount you would normally pay into your mortgage, plus any savings you would have left over. In addition, the balance used to calculate interest will be lowered by your entire paycheck.
For example, let's say you had a $125,000 balance on the line of credit and you get paid $3000 per month. Your normal mortgage payment is $750 per month and you usually have $250 left over in savings (I'm just using easy numbers). On the first of the month, $3000 would be deposited into the line of credit, reducing the balance to $122,000. You would use a credit card throughout the month for everything, and on the last day of the month, you would withdraw $2000 from the line of credit to pay off the credit card. The balance at the end of the month would be $124k + interest, which would be calculated on the balance of $122k which was maintained for the entire month. If you needed that $250 for something, you could just withdrawal it from the line of credit. In fact, my co-worker says that since a payment is technically made each month, you can effectively "skip" a mortgage payment if a big emergency comes up.
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