The mortgage market has been through a roller coaster ride ever since the end of the Dot Com boom/bust in the early years of the 21st century. Interest rates were dropped to help stimulate the economy and they were kept low. This led to lots of homeowners refinancing their 30 year mortgages to lock in lower rates. Also homeownership was more affordable due to lower rates and more people flowed into the real estate marketplace as buyers. This increased demand and builders increased their activities to supply that demand. Also financial institutions were encouraged to lend money on favorable terms to consumers to help increase the rate of homeownership in the country. It also led to lots of investors jumping into the market to profit from high rates of appreciation.
You can see that the trends of increased affordability through lower payments and lower principal pay off have led to headaches for subprime buyers and for highly leveraged investors. Subprime buyers were sold on the dream of home ownership, on low initial payments and on the likelihood of being able to refinance to pull out equity as the home appreciated in the California market.
The alternative of making higher payments and taking shorter loan terms is not really affordable for most homeowners.
There is a new approach that well qualified buyers will want to look into. That is taking advantage of high interest rates being offered by banks for deposits these days. Schwab, for example, pays 4% on bank deposits and pays for any ATM charges so the consumer can use any ATM to withdraw money. The banks are looking for consumer deposited funds to loan out for mortgages because traditional sources of investor dollars have become more scarce and more risk averse.
So consumers that wish to earn higher interest rates on bank accounts can earn more than the traditional 0% that they usually get on checking accounts.
The hottest loan of this type is the Home Ownership Accelerator offered by CMG Financial and GMAC bank. It pays the same amount as the homeowner’s mortgage! To take advantage of the HOA the homeowner refinances the current mortgage into an HOA loan, a joint bank account and first position home equity line of credit. The homeowners that benefit most from the HOA are those who have strong income and active savings and investment accounts. The HOA pays a higher rate of interest than checking, savings, CD, money market accounts. So just transferring funds from idle or low earning accounts will accumulate interest AND simultaneously reduce the home loan balance so the homeowner actually pays LESS interest expense on the loan. The innovative feature of the HOA is that any funds transferred into the HOA can easily be transferred out whenever needed for emergency needs. Unlike making addtional or prepayments to a conventional mortgage, no refinance is necessary to access your equity.
There is a special benefit for homeowners who are business owners, they are able to manage the cash flow of their businesses to further reduce their residential loan balance and earn a higher return on their business working capital.
Learn more at www.homeownershipaccelerator.net
