How to Use an Equity Accelerator to Cut Your Mortgage an Average 50% Or Better – Guaranteed!

June 22nd, 2009 46 Comments
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Although it’s only been in the American market for a few years, the equity accelerator is poised to take the U.S. mortgage industry by storm. It may be hard to believe, but the equity accelerator can reduce the interest paid and term of a loan by 50% or greater.

The Problem

Traditionally, lenders focus borrower attention on keeping their monthly payment “comfortable.” They are careful not to mention the long-term payoff amount for a 30-year, fixed mortgage loan. The fact that total payout on a house held to term is between two and three times the original purchase price is never mentioned.

Americans move on average about every seven years. Therefore, lenders have structured their mortgage repayment plans so that almost all of the first seven years’ payments go toward interest. Very little of each payment goes toward principle.

The financial industry has also laid onerous pre-payment penalties in the $5,000 to $15,000 range on the back of borrowers. And in the past decade or so, even more creative ways have been devised to place the consumer at a disadvantage.

The notorious Adjustable Rate Mortgage, or ARM, is one of the worst. But as of mid-2008, many of these have been coming back to haunt the mortgage industry as homeowners default when ARMs adjust upward.

Consumers without question, have been foolish and gullible during the first decade of the 21st Century. But the financial industry has not hesitated to take full advantage of consumer ignorance and vulnerability.

Adding to the burden is the high level of taxation in the United States. Small business owners in particular are sometimes forced to borrow to keep them paid. Government induced inflation adds to the burden.

The Solution

The equity accelerator, also known as the mortgage accelerator, offers great potential for relieving these tensions to the benefit of both consumer and lender. There is great opportunity for creating a financial environment in which both lender and borrower may prosper.

Exactly how does the equity accelerator work its magic? The handful of companies pioneering this market each has their own unique configuration.

The bi-weekly payment plan is the forerunner of the equity accelerator. Under this system half payments are made every two weeks instead of monthly. This gives you an extra half payment every year, and shaves about 16% off your mortgage.

This is good, but it comes nowhere near the power of the equity accelerator to cut a mortgage down to size. The best plans do not require refinancing and are thus consumer oriented.

The most powerful equity accelerator plans involve setting up a money merge account in conjunction with the mortgage. The money merge account is simply a standard home equity line of credit into which the homeowner deposits all of their monthly income.

This account operates similar to a traditional interest bearing checking account with an open-end interest calculation. In addition to the monthly mortgage payment, all bills and obligations are paid from the account.

As reported in Personal Real Estate Investor magazine (March-April, 2008) the power lies in fluid movement of funds between the line of credit and the mortgage to maximize the advantage. According to Thomas Chester, CEO of United First Financial,

“the secret is repositioning regular income that is effectively idle money…The repositioning occurs when income is applied in a lump sum to the balance owing on your line of credit. This keeps the credit line balance as low as possible and significantly reduces interest charges… This means that more money goes toward paying the principal…each month and the mortgage is paid years ahead of a standard mortgage schedule.”

The beauty of the concept is that it impacts all debts in the same positive fashion, not just the home mortgage. The pay-off for credit cards, student loans, car loans and virtually all other loans can be reduced by about 50% on average.

The equity accelerator concept has been in play in Australia and other countries for about 20 years. As noted earlier it is poised to sweep the U.S. mortgage industry in the next 3-5 years. This truly is a turning point — a paradigm shift — in mortgage history. As usual, the United States is the late-adopter, but better late than never.

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